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Fostering positive change through investments: Generali leverages its role as a key global institutional investor and asset manager to apply strict ESG (Environmental, Social and Governance) criteria to the Group’s investments.
The sharp increase in oil prices (+29% year to date) has been one of the key factors behind rising fears of global inflation overheating and has led to speculations about the start of a new commodity super-cycle.
Year to date, Brent prices have been up by nearly 30% to US$ 67/bbl, one of the fastest increases in decades. The climb is set to continue well into summer, and we project prices to peak at just below US$ 75/bbl by the end of Q3.
A quick global recovery will push up demand strongly, against a tightly disciplined supply of OPEC+ and a slower than in the past pick up in US shale production. Stronger supply and growth normalization is then set to gradually drive prices back within the range of US$ 60 to 65/bbl, which suits both US and most of OPEC producers.
Energy equities’ recent outperformance still has legs. Higher oil prices will push earnings further up keeping valuations attractive. The ESG score is a negative but the cyclical upturn and low positioning bode well at least in the short term.
Oil sector credit looks cheap to fundamentals but will remain hindered by its poor ESG profile especially as the ECB might decide to underweight Oil bonds in its purchase programs.
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Focal Point ǀ Oil: strong, but not permanent price increase