Russia is a winner from the whole energy imbalance we are witnessing now where the price of both liquid natural gas and crude is shooting up. The popularity of the green shift/ESG investing has diverted capital away from oil and gas and related fossil fuel producers along with earlier predictions of very low energy prices for the medium term. These major energy producers effectively gave up as they got discouraged to invest and ended up giving outsized pay-outs to shareholders. We see the results now with oil going from $20 per barrel last year to around $80 now, a fourfold move within an 18 months period.
We could see a squeeze in the future as post-covid demand may increase and the combination of oil and gas reserves, and production has fallen by 32% over the last ten years.
Russia should benefit from the energy dislocation we are now witnessing. GDP growth is expected to be 4.2% for this year. Russian companies are attractively priced despite a strong year-to-date return.
Domicile: Bermuda
Source: Bloomberg LP, PCM, Russia Briefing