London Daily

Focus on the big picture.
Tuesday, Sep 08, 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
British Chambers of Commerce Forecasts UK Growth of 1% as Investment Remains Weak
UK Suspends Local Government Reorganisation Decisions and Cancels Planned Shadow Authority Polls
UK Parliament Opens Inquiry Into Gaps in Climate Change Preparedness
Andy Burnham and Xi Jinping Hold Talks on Trade, Security and British Consular Cases
UK Joins France, Canada and Other Nations in Measures Against Israeli West Bank Settlements
UK Announces New Sanctions Targeting Iranian Nuclear and Military Networks
British Chambers of Commerce Calls for Business Rate Reform and Productivity Support
UK Farmers Warn Dry Summer Could Reduce Crop Yields and Push Up Food Prices
UK Rail Networks Hit by Widespread Delays After Major Signalling Failures
Matt Clifford Resigns as ARIA Chair After Conflict-of-Interest Scrutiny
UK and France Say Joint Border Operations Have Prevented More Than 48,000 Irregular Channel Crossings
UK Core Inflation Remains Above Expectations as Utility and Commodity Costs Stay Elevated
Jaguar Land Rover Considers Up to 4,000 UK Job Cuts Amid Automotive Industry Pressure
UK Government Pauses Local Authority Reorganisation for Legal Review
UK Public Borrowing Reaches £1.8 Billion in July, Adding Pressure Before Autumn Budget
Chancellor John Healey Puts Regional Devolution and Fiscal Discipline at Heart of UK Growth Plan
Counter-Terrorism Police Lead Salford Investigation After Two Teenagers Charged
UK Rejects Financial Reparations for Transatlantic Slavery
UK and Egypt Step Up Diplomacy Over Escalating West Bank Tensions
UK Pauses Council Reorganisation Across Four English Counties
Jaguar Land Rover Plans 4,000 Job Cuts in Major UK Restructuring
UK Unveils Planning and Regulatory Overhaul to Speed Infrastructure and Economic Growth
University of Bristol Opens £500 Million Innovation Campus
Families Give Evidence to Independent Review of Sussex Maternity Failures
Sweden Confirms Deportation of 458 British Citizens Over Post-Brexit Residency Rules
UK Launches £3 Million Challenge for Long-Duration Energy Storage
Reform UK Proposes £100 Billion in Spending Cuts and Brownfield Deregulation
Andy Burnham Warns Macron That EU Procurement Rules Could Hurt British Steel
Andy Burnham Faces Major Decision on Future North Sea Oil and Gas Drilling
SEND Support in England Projected to Reach One in 10 Pupils
England’s Housing Courts Struggle With Surge in No-Fault Eviction Cases
Violent Clashes Erupt in Portsmouth During Protest Against Asylum Processing
Three-Quarters of NHS Emergency Staff Report Regular Violence or Aggression
UK Considers Converting Female Prison Space for Male Inmates as Overcrowding Worsens
UK House Prices Record First Annual Decline in Nearly Three Years
UK Government Reassesses Policy Toward Israel Amid Calls for Diplomatic Shift
Reform UK Faces Police Scrutiny Over Alleged Foreign Donations Scheme
University of Bristol Opens £500 Million Temple Quarter Enterprise Campus
Online Bookmakers Accused of Privacy Breaches Through Cookie Consent Practices
Health Campaigners Urge UK Government to Abandon U.S. Pharmaceutical Agreement
Three-Quarters of UK A&E Staff Report Regular Violence or Aggression
Far-Right Demonstrations Target Portsmouth as Small-Boat Crossings Fuel Tensions
UK Records Hottest Summer on Record After Severe Heatwaves
UK Travellers Face Renewed EU Border Delays as Temporary Flexibility Ends
UK Rejects Calls to Pause AI Data Centre Expansion Despite Energy Concerns
UK Defence Figures Push for 3% Spending Target Amid Falklands Concerns
England Faces Rising Financial Pressure as Special Educational Needs Plans Surge
Metropolitan Police Consider Reform UK Probe Over Overseas Donations
Keir Starmer to Leave Parliament, Triggering By-Election
UK Treasury Weighs Windfall Taxes on Banks and Oil Companies Amid Bond Market Turmoil
×