Aug 25, 2022
We hear quite often the argument that the oil price has peaked due to less demand in a slowing world economy and the transition to cleaner energy. While oil remains the most important source of energy, we should not forget one important factor, namely that the supply of the black gold is constrained. On the supply side, oil majors and NOC’s have indeed been underinvesting in new oil production, oil refining and new discoveries for more than a decade now. The US government has depleted its oil reserves that touch a 40-year low. Opec nations have recently announced that they are prepared to reduce output as “action would be needed to stabilize world oil markets”. The outcome of the discussions on an agreement on the Iranian nuclear programme permitting Iranian oil exports remains highly uncertain. These supply factors will support the oil price going forward. Oil companies, namely Totalenergies and Subsea 7, currently represent 10% of our European value portfolio.