Will Commodity Companies Survive the Oil Price Slump?

Commodities have been a difficult place to be for investors over the past few years with top funds losing 30% a year - for four years in a row. Can the sector survive?

Emma Wall 17 September, 2015 | 9:20AM

Falling oil prices will cause big problems for oil and gas companies both this year and next, Moody’s Investors Service has warned.  Morningstar analysts forecast oil to stablise at $70 over the long term – but today Brent sits at just $47 a barrel.

Commodities have been a difficult place to be for investors over the past few years. After an incredible bull run to the beginning of 2011, in which the price of oil reached $147 a barrell, natural resources have disappointed since. After the global recession the diversification benefits of commodities, buoyed by demand from China, made the sector attractive to retail investors. Funds such as BlackRock Gold & General saw considerable inflows. In 2009 the fund, run by Evy Hambro returned 40% to investors, followed by 42% the following year. However in the five years since, the fund has lost a considerable sum, down 21% year to date thanks not just to the recent oil price fall but wider natural resources losing value.

The fund retains it’s Gold Analyst Rating thanks to the strong management team – but the sector is troubled.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Artemis Global Energy R Acc0.21 GBP2.21
BlackRock Gold and General A Acc1,414.16 GBP1.08
BP PLC328.60 GBP0.00
Exxon Mobil Corp47.31 USD0.00

About Author

Emma Wall  is former Senior International Editor for Morningstar

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