Guinness: Oil investments still have upside potential
Demand from emerging economies is a “near irresistible force” that is likely to drive oil prices up 40% in the next five to ten years, said commodity investor Tim Guinness. In a recent interview with Citywire, a UK-based investment news service, Guinness said he believes OPEC’s “pricing policy” and demand from emerging economies are the principal drivers behind recent price increases. “Mapping out the investment case for his latest venture, Guinness noted that OPEC had managed to build in an average increase in price of roughly $10 a year without causing demand to fall, a factor which supported investment into oil producers,” says Citywire. As the lead manager of Guinness Asset Management Global Energy fund, he’s betting that there’s still a lot of upside potential left in this cycle. ‘Traditionally, proven oil reserves have changed hands at a third of the oil price, but now they are at a discount and trading at around a fifth of the price,” he said, adding that discounts are likely to decrease as people become more comfortable with higher prices. He expects that many companies currently adding proven reserves will be re-rated at a much higher value.Published Thursday, April 10th, 2008 at 6:11 pm and filed under Industry News.