Investment guru Mark Mobius says oil prices to rebound to $60 by end of year

The emerging-market investment pioneer Mark Mobius said he expects oil prices to rebound to US$60 a barrel by the end of the year as the supply of crude shrinks, giving a measure of relief to major oil producers like the UAE and other Arabian Gulf nations. Oil prices have shot up by almost 20 per cent in the last three months since declining by as much as 70 per cent since mid-2014.

“Oil is already rebounding,” said Mr Mobius, the executive chairman of Templeton Emerging Markets Group.“ We think it will continue. It’s quite possible for $60 a barrel. I know that most people would not venture that. People would say no, $40, or $50. People tend to look back but I think it could quite possibly surge up to $60 by the end of the year for a number of factors.”

Mr Mobius, who spoke to The National at Templeton’s offices in Dubai on Sunday, said that declining rig counts, project cancellations and traders who buy oil derivatives as a financial investment covering bets that the price of oil will decline further, have all contributed to rising prices this year. Oil is unlikely to rebound back to a $100 a barrel soon though as $60 a barrel is still above most break even prices for Arabian Gulf producers, he noted.

Nations in the region have been hard hit by the collapse in the price of oil since mid-2014, prompting moves to reduce subsidies and in the case of Saudi Arabia to overhaul its economy completely by pledges of privatisation and an increase of taxes.

Mr Mobius applauded such moves but warned they were unlikely to happen overnight. Still, the investment guru said he was most bullish on Saudi Arabia in the region, followed by the UAE even though equity valuations are not bargain basement.

“Dubai has really led the way of creating a diversified economy and the Saudis have taken a page out of that book and realise that this is good,” he said.

Elsewhere in the world of emerging markets, Mr Mobius said he was most bullish about countries including Vietnam and India, two countries that are not only net oil importers and have benefited from the spate of lower prices but are also keen to reform their economies.

India’s outlook was given a shot in the arm in 2014 after Narendra Modi, the country’s reform-minded prime minister, took office. Since assuming power, Mr Modi has lost little time in his plans to overhaul the country’s economy. As well as moving towards market-based energy pricing by removing energy subsidies, Mr Modi is also getting ready to pass a goods-and-services tax, to open up more to foreign investment as well as to better target subsidies for fertilizers, cooking gas and food.

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