Conventional discoveries outside the US are at levels not seen since 1952 when oil demand was almost 90% lower than current levels.
If indeed commentators are being complacent about the oil glut, the question is whether they should invest now in commodity related sectors before the fundamentals tighten?
For Tom Becket, chief investment officer at Psigma Investment Management commodity prices, particularly oil, have now moved back to fair value, though he acknowledges that any resumption of falls in resource prices would be particularly bad news for emerging market economies.
“We still take the view that the tidal wave of debt defaults that many were suggesting earlier this year is unlikely,” he says.
“Certainly, there will be further bankruptcies in the oil sector and other commodities, although most of those bonds affected are now in the hands of specialist investors and distressed debt managers.
“Our view is that damage can still be done from the commodity sector but we are in a different and better place now to where we were in early 2016 and 2015.”
