The price of crude oil is of critical importance to specialist vehicles such as the Junior Oils Trust. Prices fell heavily during the second half of last year, but Angelos Damaskos, manager of the Trust, believes that OPEC's response to the economic crisis should help them to recover by the end of the year.
He maintains that a price range of $50 to $80 is quite conceivable, but even if it were to fall short, a degree of relative price stability would be welcome following the volatility of 2008. His confidence in an upward price move is reflected in the fact that he has increased the Trust's exposure to the Norwegian krone, which tends to shadow the oil price to a certain extent.
The fund's previous bias towards small-cap explorers and producers resulted in some severe markdowns through the latter stages of 2008, but Mr Damaskos maintains that the sector has been oversold, and he has taken advantage of low valuations to boost stakes in well-capitalised, mid-cap companies.
Mr Damaskos says that the low price for crude oil has resulted in an ''industry-wide curtailment of exploration projects, thereby widening the gap between new production and demand''. This is certainly not a new phenomenon, but when demand returns to its five-year rolling average, the lack of new production will mean that small- and mid-cap producers with existing provable reserves will become all the more attractive to the majors.
Junior Oils has held stakes in 10 producers that have been subject to bid approaches over the past four years, and Mr Damaskos is confident that this figure will increase once a degree of normality returns to the market.
JUNIOR OILS TRUST (A ACCUMULATION) | |||
|---|---|---|---|
| NAV: | 105.4p | 3-YEAR SHARPE RATIO | -0.24 |
| SIZE OF FUND: | £30.5m | 1 YEAR PERFORMANCE | -41.99 |
| No OF HOLDINGS | 40 | 3 YEAR PERFORMANCE | -31.66 |
| SET UP DATE | 20 Sep 04 | 5 YEAR PERFORMANCE | na |
| MANAGER START DATE | 20 Sep 04 | TOTAL EXPENSE RATIO | 1.86% |
| TURNOVER | 30% | YIELD | na |
| VOLATILITY | 6.55 | MINIMUM INVESTMENT | £1,000 initial, £100 thereafter |
| TRACKING ERROR | 4.45 | MORE DETAILS | capitalfinancial.cm |
Morningstar & FT Funds
| Top 10 Holdings | Percentage |
|---|---|
| Premier Oil | 8.1 |
| Tullow Oil | 7.9 |
| Det Norske | 6.5 |
| Soco International | 5.4 |
| Venture Production | 5.3 |
| Dragon Oil | 4.5 |
| Dana Petroleum | 4.1 |
| JKX Oil & Gas | 4.0 |
| Questerre Energy | 3.8 |
| Noreco | 3.6 |
| Geographic Exposure | Percentage |
|---|---|
| UK | 26 |
| Asia | 20.2 |
| CIS | 19 |
| Africa | 12.4 |
| Other | 22.4 |
