Energy sector gains as IEA warns of oil supply shortage

The International Energy Agency (IEA) is warning that that the oil price could reach record levels within the next five years as the world faces a ‘supply crunch’. The policy advisory group reports that supplies have been falling from mature markets, such as the UK’s North Sea, while there have been delays in establishing new supplies from emerging markets such as Russia. At the same time, buoyant global growth and expanding emerging economies mean that total energy demand is increasing faster than forecast. This, combined with recent supply disruptions from Nigeria, pushed the price of crude up over USD 76 a barrel in early July to the highest level in almost a year. Net long positions on US-traded West Texas Intermediate, which anticipate prices strengthening, have risen sharply in the last week.

Chris Palmer, Head of Global Emerging Markets at Gartmore notes a striking change in the way in which the sector is being valued. “In the past month, the emerging market energy sector, which had been languishing in the belief that oil prices would fall in 2007, has rebounded sharply.” The Gartmore Emerging Markets Opportunities Fund and the Gartmore SICAV Emerging Markets Fund, both managed by Chris have increased exposure over the last quarter. The funds, which are both ranked in the top decile over the last year¹, contain shares in the world’s second largest oil company by market capitalisation, PetroChina, as well as Petrobras of Brazil, Gazprom of Russia and the Hungarian refiner Mol. Gartmore’s leading Gartmore China Opportunities Fund, managed by Charlie Awdry is also overweight in the oil supplies sector, with exposure in China Oilfield Services and Anhui Tiande, in anticipation of rising on and off-shore capital expenditure.