When Simon Mawhinney of Allan Gray looks at the energy landscape today, he’s reminded of where the gold market was in 2013 before that sector’s dream run. Prices were unsustainably low, and the industry overall was losing money. That made it the perfect time to buy producers capable of riding out the storm, the same opportunity in front of oil investors today.
While he’s not attempting to predict the turning point, the fact is crude prices need to be around US$50 per barrel to sustain production.
“Many of these companies are running on the mother of all hamster wheels and in fact going backwards, eating into their capital to produce oil. Sooner or later that has to end.”
In this interview, Simon expands on why the supply/demand equation will remedy itself taking into account the OPEC rift, and shares one oil stock offering excellent value.