Julia Payne and Maiya Keidan

TORONTO/LONDON – As the world was facing an energy crisis, hedge funds who bet on a huge comeback in commodities saw soaring returns over the first nine months 2021.

PivotalPath reports that the global average macro commodities hedge fund has increased 23.2% over the first nine month of this year. In contrast, PivotalPath reported that the equity energy fund average rose 12.3%.

The pandemic caused travel restrictions to be imposed and locked down, which in turn led to a decrease in investment in oil and natural gas. However, fossil-fuel demand rose sharply and pushed up fuel prices.

At $85 per barrel, the price reached a new three-year record last week. Power and natural gas prices are on the rise, especially in Europe. The benchmark European wholesale gas futures for the Dutch TTF hub had risen 400% since the beginning of the year.

These markets were volatile in September, especially since volatility measures reached a new record. UBS reports that trend-following hedge funds saw strong growth in September due to natural gas.

The September performance of Westbeck Capital Management in London, a long-short hedge fund with $230m in assets, was 17.2%. This brings year-to-date returns up to 94%.

According to Reuters’ August investment letter, Westbeck entered September placing long bets in exploration and production companies throughout Canada. This included Canadian Natural (NYSE) Resources, Baytex Energy(NYSE:) Corp, and MEG Energy. According to the August investment letter, Reuters saw that Westbeck noted that oil prices and equity had been falling in summer. This was an excellent buying opportunity.

Odey Asset Management, a U.K.-based commodities-focused fund that also invests in commodities, made 40% between Oct. 1 and Oct 15. Auspice Capital was a Canadian-based computer-driven commodity-focused fund that earned returns of 30% in the 12 months to Oct. 14.

The fund’s chief investor officer Tim Pickering said that although demand could ease in the coming decade, it is still possible to get $100-150 of oil. The price of oil has fallen in inflation adjusted terms. The volatility will probably remain high.

Andurand Capital Management in London and Malta has enjoyed a fantastic year, with one of their two funds increasing 83% after a 20% increase in September. Reuters also reported that Andurand Capital Management had a strong year.

Analysts believe that the current investor situation leaves oil with room to rise. According to the Commodity Futures Trading Commission, managed funds have an estimated net long position in excess of 327,000 contracts on NYMEX.

RBC Capital Markets data shows that this level is far below the bullishness of summer, but it does leave room for longer positions to be taken by more investors.

David D. Tawil (co-founder of Maglan Capital in New York and interim CEO at Centaurus Energy) stated, “I believe that we will get to triple digits.”

Tawil refused to release his performance data. He stated that coronavirus restriction being lifted, rising inflation, and an increase in winter demand will drive the rally.