Oily solutions amid seismic shifts

Dubai: Something must be changing: Afghan poppy growers are dumping opium to grow wheat.

Markets are now gripped by a new phrase: “Agriflation” (rising food prices), and all around, clear evidence of seismic changes are afoot as investors adapt to markets dominated by rising commodity prices and indices. Of all the commodities, the shine this week has been in the black stuff – oil.


Where to now, oil price? Over $200 a barrel has been mentioned by the class of “$100-a-barrel”, buoyed by their earlier success. “If I had to average out the oil researchers”, says Stan Lock at Brewin Dolphin in London, “I would guess that the market is confident of prices rising to $200 a barrel. Although such a result might be driven in the short term by speculators, it’s also fair to say that I don’t see too many people calling the price down below $90 a barrel in the short term”. This would be a fairly significant range for oil investors as most energy funds are currently pricing their oil between $75 and $85 a barrel, according to Laura Lau at Sentry Capital.

In this environment oil bulls will rage. Eric Sprott of Sprott Asset Management has given his name and 10 per cent of the monies towards an energy fund driven by what he calls the “oil peak” story: “we are believers for a number of years (that) we are in the peak oil scenario where the prices will rise essentially forever because the world needs more oil than it can possibly produce and, in fact, production will go lower”.

Gulf News