(Bloomberg) — A hedge fund run by commodities dealer Doug King posted a report return final 12 months, due to hovering vitality, meals, energy and freight costs.

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King’s $244 million Service provider Commodity Fund gained 74%, beating its earlier better of 59% in 2014, in accordance with an investor letter seen by Bloomberg.

London-based King, 55, is amongst a cadre of hedge fund managers, together with Pierre Andurand, who made enormous income from commodities final 12 months amid a world financial restoration from the coronavirus pandemic and provide disruptions.

The Bloomberg Commodity Spot Index, which tracks vitality, metals and crop futures, jumped 27% in 2021, essentially the most in over a decade.

Oil surged greater than 50% to round $80 a barrel. It’s virtually up one other 10% up to now this 12 months. King mentioned it might quickly hit $100 and even $200 over the subsequent 5 years as a consequence of a scarcity of exploration and funding to keep up current provides.

“We imagine in structural supply-side commodity inflation that almost all won’t have ever seen — the very best because the Seventies,” he mentioned in an interview. “Solely OPEC will react to cost metrics and they’re undershooting each month.”

OPEC Troubles

OPEC and its companions are steadily growing crude output after making deep cuts of just about 10 million barrels a day in 2020 when the pandemic first struck. Whereas the group is supposed to be pumping an additional 400,000 barrels a day every month, a lot of its members are struggling to succeed in their quotas.

“In apply, so much much less oil is making its approach to the market,” the Service provider Commodity Fund mentioned in its investor letter. “Its members are merely unable to return to pre-covid ranges of output. That is all right down to a scarcity of funding.”

Throughout the 23-nation OPEC+, the “solely actual spare capability” resides in Saudi Arabia, the United Arab Emirates and Kuwait, in accordance with the letter. Even Russia, which leads OPEC+ together with the Saudis, can’t pump far more.

“It’s no state secret that Russia is at, or very close to, its most,” the letter mentioned. “If not subsequent month, then actually by April it could not have any extra barrels to offer.”

Whereas the speedy unfold of the omicron variant might sluggish financial progress, many analysts agree with King’s upbeat evaluation of commodities. Goldman Sachs Group Inc. is “extraordinarily bullish,” citing low spare capability amongst oil producers and the U.S. Federal Reserve possible elevating rates of interest this 12 months, which might deter traders from shares and bonds.

OPEC+ member Oman this week mentioned the group would attempt to forestall the oil market “overheating” and didn’t need costs to succeed in $100 a barrel.

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