A hedge fund that returned almost 60 percent last year by betting on oil’s collapse says the slump may have further to run.

Crude may drop below $40 a barrel in the next few months without a substantial slowdown of production growth in the U.S. and Canada, said Doug King, London-based chief investment officer of Merchant Commodity Fund. Bearish oil wagers in the second half of 2014 helped the $260 million fund gain 59.3 percent, the best performance since its June 2004 start.

Brent futures lost 48 percent last year, the most since 2008, as the Organization of Petroleum Exporting Countries resisted calls to cut output. The U.S. is pumping the most crude in more than three decades as horizontal drilling and hydraulic fracturing unlock shale reserves, adding to a global supply glut that Qatar estimates at 2 million barrels a day.

“Unless we see real slowdown in production growth in the U.S. and Canada, there’s no point in trying to bottom fish as you are getting no help from the fundamental picture,” King said in an interview in Singapore on Jan. 8. “I wouldn’t be surprised to see the 2008 low of $35 to $30.”

West Texas Intermediate crude, the U.S. benchmark, plunged 54 percent in 2008, dropping as low as $32.40 on Dec. 19, amid the global financial crisis. Futures have extended last year’s 46 percent decline to trade at $46.83 this week.

Brent, the marker price for more than half the world’s oil, fell below $50 a barrel to the lowest in 5 1/2 years this week and was at $50.94 a barrel on the ICE Futures Europe exchange at 4:14 p.m. in Singapore today.

Coal Too

Merchant made 19.5 percent in December by forecasting a slump in crude and coal prices, King said. Brent fell 18 percent last month, while benchmark European thermal coal for next-year delivery lost 8.4 percent, according to broker data compiled by Bloomberg.

U.S. crude output expanded to 9.14 million barrels a day through Dec. 12, the highest level in weekly data from the Energy Information Administration that started in January 1983. Supply has risen 66 percent over the past five years and exports, still limited by law, reached a record 502,000 barrels a day in November.

Merchant’s bearish calls helped it outperform its peers as commodity hedge funds lost an average 0.48 percent in 2014 following a 3.1 percent decline a year earlier, data from eVestment, an Atlanta-based researcher, show. Andurand Capital Management LLP, which manages $400 million in London, also profited from falling energy prices, gaining 38 percent, according to a person with knowledge of the performance.

Assets Grow

Assets under management at Merchant, also run by Singapore- based Michael Coleman, rose to $260 million from $143 million in January, King said. About $50 million of the increase came from new investor money and the balance from performance, he said.

Some of Merchant’s peers say oil’s slide is nearing an end. Crude may trade in the $40-a-barrel range in 2015 with “some recovery” likely by the second half of the year as demand picks up, Andrew J. Hall, the head of Astenbeck Capital Management, wrote in a Jan. 2 letter obtained by Bloomberg News. A significant amount of U.S. and Canadian production can’t cover the cash costs of operating at that price, he said.

Cheaper oil is lowering costs for other commodities such as iron ore and agricultural products, keeping a cap on prices, according to King. Iron ore may fall to the $50 a metric ton range during the first half of this year, he said. Ore with 62 percent content delivered to Qingdao, China, was at $71.36 yesterday, according to Metal Bulletin Ltd.

The Bloomberg Commodity Index of 22 products fell 17 percent in 2014, a fourth annual loss, amid an oversupply of raw materials from grains to metals.