Prominent Oil Trader Says Market Is in Denial Over Ukraine War

One question oil traders and analysts are asking as Russia wages war on Ukraine: Why aren’t crude prices even higher?

A prominent hedge-fund manager, Pierre Andurand, thinks traders are to some extent in denial. “The market doesn’t want to believe that it could be really bad news,” Mr. Andurand, chief investment officer at Andurand Capital Management, which manages $1.1 billion, said in an interview.

“I don’t think there’s anyone trading now who has actually seen large supply disruptions that have impacted the price,” Mr. Andurand said. “They don’t want to believe in bad news, a bit like the beginning of Covid.”

That said, Mr. Andurand—who placed a massively profitable bet against oil prices when Covid-19 began to rip through China in early 2020—said the effects on oil prices are more ambiguous this time around. But he’s betting prices will stay high or keep rising.

Russia exports 6.5 million barrels of oil a day, 2 million of which goes to China and will keep flowing, Mr. Andurand said. If China buys some more Russian oil at discounted prices, the rest of the world would be seeking to make up for 3 million barrels a day of lost output if, say, Russia found it difficult to sell oil to the West. Mr. Andurand said producers, mainly in the Gulf, could pump 1.5 million barrels a day more. Releases from strategic oil reserves would make up the rest, he said.

“Russia would have a lot less revenue,” Mr. Andurand said. “If we need to, that’s something that will be able to be done without too dramatic an effect on oil prices.”

Brent crude, the global benchmark, popped above $100 a barrel when Russia invaded Thursday and again Monday. It has slipped back to $98.22 a barrel.

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