The Junior Oils Trust continues to be the best-performing energy fund in the UK over a 12-month period delivering a gain of 49.9% (as at 31 January 2011)*, compared to an increase in the WTI oil price of 26.5% and 11.6% for the fund’s benchmark, the FTSE 350 Oil & Gas index.
Geopolitical risks such as the unrest in Tunisia, Egypt and some Middle-Eastern countries have supported rising oil prices in January and early February. Brent crude, in particular, proved to be significantly more valuable than its American counterpart, the West Texas Intermediate (WTI). Despite WTI being a lighter, easier to refine crude and therefore more valuable in refining margins, at times of unrest Europe traders offer a premium to secure supply. At the time of writing, the gap between Brent and WTI has widened to as much as $20/barrel. Oil imports from Canada and cheap natural gas prices in the US, combined with weak demand due to a slow economy, are depressing the WTI price. Present worries about the risks of closure of the Suez Canal appear to be exaggerated. The military is still in control of the situation in Egypt and it is doubtful that civil unrest in some Middle-East countries can get out of control. Nevertheless, it is clear that there is a change of attitude of the general population against autocratic, often corrupt regimes which have exploited their country’s wealth for so long for the benefit of a few members of the elite. In times of slow economic activity, high unemployment and large debt problems, the general public is bound to react more violently to defend its rights.
The high Brent price is good news for North Sea and West African producers as it improves their cash-flow and profitability. It is also good news for the Junior Oils Trust which has significant investments in companies operating in these two regions. The premium value of Brent can also attract the attention of acquisitive national oil companies which are currently looking for large reserves in relatively safer jurisdictions. We expect further corporate activity in this sector for the year ahead.
The recent takeover offer for the fund holdings in Regal Petroleum was not entirely welcome. It is no surprise that Ukrainian-backed entities are trying to acquire the company after its share price collapsed under allegations by Ukrainian environmental authorities that certain regulatory requirements were not met. The threat by a governmental agency to suspend licences and operations was enough to depress the share price to about 11p. However, the current offer of 38p provides the Junior Oils Trust with an attractive profit and we have sold one third of our holding at this stage.
*Source: Financial Express and Morningstar
If you wish to speak with Angelos Damaskos, CEO, Sector Investment Managers and Fund Advisor, Junior Oils Trust please contact Sally Moore or Saira Khan on 0207 726 6111.
About Sector Investments
Sector Investment Managers is an independent resources focused investment management company authorised and regulated by the FSA. It advises three open-ended fund products, Junior Gold, the Junior Oils Trust and the Junior Energy Fund, as well as providing advice and management for segregated accounts. Angelos Damaskos founded Sector Investment Managers in 2004 to provide investors with diversified access to the super-cycle in energy and commodities. www.sectorinvestments.com.
RISK WARNING:
This material is directed only at persons in the UK and is not an offer or invitation to buy or sell securities. Opinion expressed whether in general or both on the performance of individual securities and in a wider economic context represents the views of Sector Investment Managers Limited at the time of preparation. They are subject to change and should not be interpreted as investment advice. Sector Investment Managers Limited and Capita Financial Managers Limited are authorised and regulated by the Financial Services Authority. Any investment in the Fund should be based on the Fund’s current Scheme Particulars, Prospectus or its Key Features document. Past performance is not a guide or guarantee to future performance and the value of investments and any income from them may go down as well us up, and you may not get back the amount originally invested. Issued by Sector Investment Managers Ltd.
';