Will the Oil Retreat Shift Sovereign Fund Allocation?

Russia, Abu Dhabi and Norway seem to think so.


For the first time since April 2016, the price of oil dipped below US$ 40 per barrel – causing headache among some oil-based sovereign funds. Tumbling down from a June 2016 high of US$ 51.23 per barrel, oil prices then reversed course. The price of oil is an essential ingredient that impacts commodity-based economies, translating into pleasure or pain for a country’s citizens. For example, Russia’s Reserve Fund was marked down to US$ 38.18 billion at the end of July 2016, versus having US$ 38.22 billion in assets in the beginning. Oil industry analysts predict the crude price drops can be explained by an overall decrease in global trade, mixed in with the buildup of excessive storage of crude oil and gasoline. In addition, the Libyan and Iranian governments have made headway in becoming larger contributors to the world oil economy. Libya’s state—owned National Oil Corporation plans to work with the unity government to reboot exports from the ports of Ras Lanuf, Es Sider and Zueitina. Furthermore, Saudi Aramco lowered its oil prices to compete for Asian businesses against Russia and the United Arab Emirates. The state-owned oil giant said it plans to sell cargoes of Arab Light oil at US$ 1.10 per barrel in September – a price cut from US$ 1.30 per barrel for August.

Sovereign Wealth Funds

According to Episode 15 of “Follow the Money”, the hosts discuss the low or negative returns of wealth funds in latest fiscal year. The annual returns will no doubt have an impact on future allocation. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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