Skyrocketing oil prices have undermined numerous sectors within Americas economy, but the expensive price of crude oil has also helped T. Rowe Prices $1.6 billion New Era Fund and a number of other natural resources funds outperform the flagging Standard & Poors 500 Index, Bloomberg News reports.
Record-high oil prices have fueled the funds performance to an 8.2% average five-year return while the Standard & Poors 500 Index has lost 2.8% during the same period. The fund, which is required to invest two-thirds of its assets in natural resources, ranks No. 10 out of 24 natural resources funds tracked by Bloomberg.
State Street Researchs Global Resources Fund, which is ranked No. 1 in Bloombergs natural resources category, boasts a 24% annual return while the S&P 500 Index has slipped 1.5% during that period.
New Era fund manager Charles Ober attributes the runaway oil prices to an ongoing shortage caused by energy executives who postponed investments in developing new oil fields when commodities prices were lower. Ober expects oil production companies like Murphy Oil Corp. and Baker Hughes Inc to outperform the broader market for the next 18 to 24 months. Between 1985 and 2002, crude oil prices hovered around $20 per barrel. Oil prices recently reached a record $47.27 a barrel, and while they have fallen this week, there is still some speculation they could top $50. Ober fully expects prices will recede into traditional ranges when the conflict in Iraq is stabilized. In the meantime, oil companies will continue spending additional resources on production to offset shortages, he said.