Franklin Templeton Investments, which has $740 billion in assets under management, has been making some big bets that the oil rally is far from over. WTI prices, which dipped near $26/bbl in February, have recovered to around $50/bbl in recent weeks. However, Franklin Templeton believes that prices are not yet high enough to balance the oil market.
“Can we get enough supply at $50 a barrel? My guess is not,” Franklin analyst Frederick Fromm said.
“Longer term, we need at least $65 a barrel.”
With global oil demand continuing to rise, the firm believes $50/bbl is not a high enough price for producers to meet global demand.
Franklin Templeton is predicting higher oil prices will benefit U.S. shale producers who were hit hard during the downturn, including Anadarko Petroleum Corporation APC, Occidental Petroleum Corporation OXY and Apache Corporation APA.
The firm has been selling shares of integrated oil giants BP plc (ADR) BP and Exxon Mobil Corporation XOM and buying shares of E&P stocks.
The firm’s commodities funds now have a record 41 percent of assets invested in E&P companies.
Fromm says that oil prices will eventually settle into a long-term range between $65/bbl and $85/bbl.
Disclosure: The author holds no position in the stocks mentioned.
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