London Daily

Focus on the big picture.
Friday, Jul 03, 2026

Hedge funds bet on oil's 'big comeback' after pandemic hobbles producers

Hedge funds bet on oil's 'big comeback' after pandemic hobbles producers

Hedge funds are turning bullish on oil once again, betting the pandemic and investors’ environmental focus has severely damaged companies’ ability to ramp up production.

Such limitations on supply would push prices to multi-year highs and keep them there for two years or more, several hedge funds said.

The view is a reversal for hedge funds, which shorted the oil sector in the lead-up to global shutdowns, landing energy focused hedge funds gains of 26.8% in 2020, according to data from eVestment. By virtue of their fast-moving strategies, hedge funds are quick to spot new trends.

Global oil benchmark Brent has jumped 59% since early November when news of successful vaccines emerged, after COVID-19 travel curbs and lockdowns last year hammered fuel demand and collapsed oil prices. Last week it hit pre-pandemic levels close to $60 a barrel.

U.S. crude has climbed 54% to around $57 per barrel during the same period.

“By the summer, the vaccine should be widely provided and just in time for summer travel and I think things are going to go gangbusters,” said David D. Tawil, co-founder at New York-based event-driven hedge fund, Maglan Capital, and interim CEO of Centaurus Energy.

Tawil predicted prices of $70 to $80 a barrel for Brent by the end of 2021 and is investing long independent oil and gas producers.

Hedge funds’ bullish bets come despite the International Energy Agency warning in January a spike in new coronavirus cases will hamper oil demand this year, and a slow economic recovery would delay a full rebound in world energy demand to 2025.

Normally, oil producers would ramp up production as prices increase, but a move by environmentally focused investors from fossil fuels to renewables and caution by lenders leaves them hard-pressed to respond, hedge funds and other investors say.

The pace of output recovery in the United States, the world’s No. 1 oil producer, is forecast to be slow and will not top its 2019 record of 12.25 million barrels per day (bpd) until 2023. Production in 2020 tumbled 6.4% to 11.47 million bpd.

The Organization of the Petroleum Exporting Countries, which has also revised down demand growth, however, still expects output cuts to keep the market in deficit throughout 2021.

“We are going to see some incredible oil prices over the next couple of years, incredibly hot,” said Tawil.

‘BULL MARKET’


Global crude and condensate production was down 8% in December from February 2020, prior to the pandemic’s spread accelerating, according to Rystad Energy.

North America’s output was down 9.5% and Europe’s production declined just 1% over the same time period.

U.S. sanctions against Venezuela and declining oilfields in Mexico have kept oil output from Latin America sluggish.

Some banks are forecasting the United States, which leads with the number of COVID-19 cases, to reach herd immunity by July, which would greatly stimulate oil demand, said Jean-Louis Le Mee, head of London-based hedge fund Westbeck Capital Management, which is long a mix of oil futures and equities.

“Oil companies, for the first time in a long time, are likely to make a big comeback,” he said. “We have all the ingredients for an extraordinary bull market in oil for the next few years.”

In the United States, hedge funds increased their allocation to Exxon Mobil Corp by 21,314 shares in the third quarter, the most recent U.S. filings compiled by Symmetric.io showed.

Hedge funds added another 9,070 shares of U.S. majors ConocoPhillips and 4,144 to Chevron Corp over the same time period.

Elsewhere, shorting activity in BP PLC fell by 16 million shares on Feb. 4 but increased slightly in European oil major Royal Dutch Shell Plc by 1.9 million shares, data from FIS’ Astec Analytics showed.

Some investors remain skeptical on Canadian oil companies, among the world’s most carbon-intensive producers, though they are bouncing back faster from the pandemic than the United States.

Current short positions rose in 10 out of 14 Canadian oil companies in the Toronto energy index during the second two weeks of January, according to filings reviewed by Reuters.

U.S. shale production will not quickly rebound, given the capital required and debt producers are carrying, lending oil prices support, said Rafi Tahmazian, senior portfolio manager at Calgary-based Canoe Financial LP.

North America’s oilfield services sector, which producers rely on to drill new wells, has been decimated, he said.

“They’re decapitated from being able to grow,” Tahmazian said. “The supply side is broken.”

Newsletter

Related Articles

0:00
0:00
Close
Luxury bags take over the World Cup: style, status symbol, or just showing off?
National Productivity Institute Highlights Weak Business Investment Outside Southern England
UK High Court Orders Reassessment of Environmental Impact in Major Highway Project
UK Cyber Security Centre Warns of Rising Threat From State-Sponsored Digital Espionage
UK Education Secretary Launches National Reform of Apprenticeships and Vocational Training
Financial Conduct Authority Tightens Climate Risk Disclosure Requirements for Listed Firms
Rail Union Suspends Planned Strike Action to Enter Formal Negotiations With Operators
Northern Ireland Businesses Seek Clarity Over Post-Brexit Trade Rules
Welsh Government Launches Regional Growth Plan Targeting Transport and Digital Infrastructure
North Sea Wind Sector Attracts £5 Billion Investment Amid Expansion of Offshore Capacity
Scotland and UK Governments Establish New Framework for Coordinated Investment in Energy and Infrastructure
UK Government Launches Major Immigration and Border Policy Overhaul Review
Bank of England Signals Interest Rates to Remain Elevated Despite Easing Inflation Pressures
National Health Service Warns of Severe Winter Capacity Strain Across Hospital Trusts
Chancellor Orders Urgent Treasury Review Amid Concerns Over Structural Public Finance Gap
Prime Minister Unveils Sweeping Legislative Programme Focused on Housing, Health Service Reform and State Energy Plan
UK Parliamentary Committee Launches Inquiry Into Falling Primary School Rolls and Public Service Impact
UK House of Lords Debates Electoral Commission Powers and Political Finance Reform
UK Parliament Considers Expanding Carbon Rules to International Aviation and Shipping Emissions
UK Traffic Commissioner Revokes Hampshire Haulage Operator Licence Over Regulatory Failures
UK Parliament Examines Risks in Public Contracts Awarded to Technology Firm Palantir
UK Competition Watchdog Moves Toward More Flexible Merger Rules to Support Efficiency and Growth
UK Government Seeks Approval for £1.15 Trillion Public Spending Plan Amid Scrutiny Over Department Budgets
UK Parliament Debates Sweeping National Security and Steel Industry Nationalisation Bills
UK Government Issues Formal Apology for Historic Forced Adoption Practices and Announces £4 Million Support Scheme
UK DEFENCE AND TECHNOLOGY STRATEGY TILTS TOWARD SOVEREIGN CAPABILITY AND INDUSTRIAL INVESTMENT
UK ECONOMIC POLICY OUTLOOK SHAPED BY LEADERSHIP TRANSITION AND FISCAL SIGNALS
STERLING STRENGTHENS AMID SHIFTING MONETARY OUTLOOK AND GLOBAL LABOUR MARKET SIGNALS
UK HPV VACCINATION PROGRAM NEARLY ELIMINATES CERVICAL CANCER DEATH RISK IN YOUNG WOMEN
UK EXPANDS PRISON SAFETY REVIEW AS GOVERNMENT SEEKS WIDER SYSTEM REFORM
UK DRIVES DIGITAL ASSETS STRATEGY WITH NEW STABLECOIN REGULATORY MODEL
UK TO EXPAND AI INFRASTRUCTURE THROUGH NEW EUROPEAN TECHNOLOGY PARTNERSHIP
UK LAUNCHES £15 BILLION DEFENCE TECH SHIFT TOWARD ADVANCED MILITARY SYSTEMS
CIVIL SERVICE FACES SHIFT IN POWER STRUCTURE AS REGIONAL GOVERNANCE PLANS EXPAND
WHITEHALL CONSIDERS MAJOR DECENTRALISATION PLAN WITH SECOND GOVERNMENT HUB IN MANCHESTER
UK TARGETS SERVICES EXPORT GROWTH IN TRADE TALKS WITH CHINA AMID GEOPOLITICAL TENSIONS
POLICE WATCHDOG PROBES OFFICERS OVER HANDCUFFING OF DYING TEENAGER IN HAMPSHIRE CASE
UK REGULATORS UNVEIL DUAL OVERSIGHT FRAMEWORK FOR STABLECOINS AND DIGITAL ASSETS
KEIR STARMER ANNOUNCES £15 BILLION DEFENCE TECHNOLOGY BOOST IN FINAL MAJOR POLICY MOVE
ANDY BURNHAM SIGNALS STRICT FISCAL RULES AS LABOUR LEADERSHIP RACE SHAPES MARKET OUTLOOK
POUND STERLING HITS ONE-YEAR HIGH AS BANK OF ENGLAND SIGNALS NO IMMINENT RATE CUTS
UK Government Confirms Rejected Asylum Seekers to Remain Amid Enforcement Challenges
UK-China Economic Talks Focus on Services Trade and High-Value Sectors
Buckingham Palace Revamp Plans Unveiled to Modernise Royal and Public Facilities
Two Dead After Light Aircraft Crash in Essex Field, Investigation Underway
Princess Diana Marked at 65 With UK Tributes Reflecting on Her Public Legacy
England Teachers Face New Pay Cap Rules for Academy School Leaders Under Education Reform
Dublin Security Alert Escalates After Stabbing and Reports of Transport Disruption
UK Government Faces Scrutiny Over £10,000 Asylum Living Cost Contribution Requirement
England Prepares World Cup Knockout Match Against Democratic Republic of Congo
×