Sprott sees oil prices continuing to climb

Date: Thursday, August 28, 2008
Author: David Scanlan, Bloomberg News

Canadian hedge fund manager Eric Sprott said he expects oil prices to rise as global crude supplies dwindle.

"We have an oil problem in the world, and it's called depletion," Mr. Sprott, 63, told legislators in Ottawa yesterday. "I am not surprised for one second that the price of oil goes up constantly."

Mr. Sprott spoke at a hearing by a House of Commons subcommittee examining soaring gasoline prices. Crude oil for October delivery increased $1.88 (U.S.) or 1.6 per cent to $118.15 a barrel on the New York Mercantile Exchange yesterday, and has jumped 64 per cent from a year ago.

"It's not easy to find oil, and it's not easy to find gas," said Mr. Sprott, whose mutual funds and hedge funds invest primarily in energy and mining stocks.

Sprott Inc., the money-management company Sprott founded, raised $200-million when it went public in May. The company's biggest fund is the $2.2-billion Sprott Canadian Equity Fund, about 88 per cent of which is invested in energy, metals and mining. It has returned 21 per cent annually in the past five years, outstripping the 15-per-cent gain for the S&P/TSX composite index.

Though higher gasoline prices are harming consumers, record oil prices are good for a country like Canada, which has the second-highest crude reserves in the world, Mr. Sprott said.

"This is a bonanza for this country. Everyone benefits."