Grabbing the Bull by the Horns: Oil Could Hit $130 by Year's End

Crude oil may reach a record $130 a barrel this year because pension funds are investing more in commodities, according to one hedge fund executive.

The outlook for oil over the next five years is also "bullish" as producers find it hard to replenish reserves and demand outpaces supply, said Pierre Andurand, the chief investment officer of BlueGold Capital Management LLP.

Oil companies such as Exxon Mobil Corp., Royal Dutch-Shell and BP are finding it tougher to replace their findings and are drilling for harder-to-reach deposits while energy demand and crude prices surge to records. With commodities prices surging to all-time highs, the California Public Employees' Retirement System, the largest U.S. pension fund, said it plans to boost investments.

Calpers, which has about $240 billion in assets, agreed at a Feb. 19 board meeting to hold between 0.5 percent and 3 percent of its assets in commodities, spokesman Clark McKinley said last week. The California-based fund last year put $450 million into commodities -- its first such investment.

"Next year, oil may rise even further to $150 a barrel," said Andurand, whose $300 million fund has so far invested 70 percent in energy and 30 percent in agriculture and metals since February.