Oil prices are likely to remain high for the foreseeable future, and investors should position their portfolios accordingly, says the CEO of one of the world’s largest independent financial advisory and asset management organisations.
The analysis from Nigel Green of deVere Group comes as oil prices climbed above $90 per barrel last week for the first time since October.
Traders are now asking ‘will it hit $100?’
The rally has slightly cooled as Israel moves to pull some troops out of Gaza, in a possible sign of perhaps easing tensions there.
Nigel Green comments: “The recent surge in oil prices, with Brent crude surpassing $91 per barrel and West Texas Intermediate climbing 21% for the year, underscores the complex interplay of geopolitical uncertainties and robust economic fundamentals.
“While fears of escalating conflicts in the Middle East, including between Israel and Hamas, a potential Iranian retaliation, and attacks on cargo ships in the Red Sea have played a significant role in propelling oil prices upward, it’s also essential to recognise that economic growth dynamics in key regions like the US, Europe, and China are also exerting substantial upward pressure on demand.
“These three economic powerhouses are witnessing robust growth trajectories, further intensifying the global appetite for oil.
“This surge in demand is likely to provide a strong support pillar for oil prices, irrespective of developments in the Middle East.”
In addition, the supply side dynamics within the oil market add another layer of complexity. The OPEC+ alliance, comprising major oil-producing nations, has exercised disciplined restraint in supply management.
“Through coordinated production cuts and gradual increases in output, OPEC+ has effectively constrained supply, preventing an oversupply scenario that could have otherwise dampened prices.
This strategic manoeuvring by OPEC+ has been instrumental in maintaining a delicate balance between supply and demand, thereby supporting elevated price levels,” notes the deVere CEO.
He goes on to say in the current environment and momentum, “we cannot rule out $100 a barrel.”
In this environment of expected heightened oil prices for the foreseeable future, strategic portfolio positioning becomes paramount for investors.
“While exposure to energy stocks may seem intuitive in a high oil price environment, investors should adopt a diversified approach. Consider allocating resources across sectors that benefit from economic growth, such as technology, industrials, and consumer goods.
“Within the energy sector, prioritise investments in companies with robust fundamentals and resilient business models. Look for entities with low production costs, strong balance sheets, and diversified revenue streams. Such companies are better positioned to weather market volatility and capitalise on favourable price environments,” he says.
Nigel Green concludes: “Economic growth in three key global regions, plus OPEC+ strategies, will keep oil prices higher for some time, regardless of what’s happening in the Middle East.”
