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Articles by Harvey

Harvey East

Investment Specialist

15 January 2026

Drill, baby, drill. It was one of the defining slogans of the opening days of President Trump’s second term, as he declared a national energy emergency. His aim was to drive down energy prices to help tackle the inflation that had plagued his predecessor. One year on, the strategy appears to have delivered. After crude oil briefly breached $80 a barrel in January 2025, the market trended lower, interrupted only by a short summer spike driven by rising Middle Eastern tensions.

Oil’s weakness in 2025 stood in stark contrast to gold, which delivered another year of stellar performance. As this month’s chart illustrates, the divergence between the two commodities has become so extreme that an ounce of gold can now buy 76 barrels of oil, a level reached only once before in recent decades. That was during the pandemic, when oil prices fell below $25 a barrel and futures briefly traded in negative territory.

This divergence is not confined to gold. Relative to equities and other commodities, oil appears strikingly cheap. So a key question for investors is how long these low prices can persist. Do current prices represent an attractive entry point?

So far, the downward pressure on oil prices has come from supply side dynamics. The physical market is oversupplied by more than 2 million barrels per day. US shale output has remained near record levels, whilst other non-OPEC producers continue to expand production. Within OPEC, Saudi Arabia has appeared willing to tolerate softer oil prices in exchange for strategic alignment with President Trump and continued US security support. Recent developments in Venezuela have further raised expectations of additional supply, though any resulting increase is likely to be gradual. As the US mid-term elections approach, Trump’s political incentives remain clear, with low petrol prices a key pressure point for voters.

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At some point, however, the risks around oil prices will start to tilt back towards the upside. The growth rate of US shale, the main driver of non-OPEC supply growth, looks to have peaked. Certainly, the rapid expansion of the last 15 years is unlikely to be repeated. Meanwhile, sanctions on Russian oil could further tighten the market. OPEC spare capacity has been steadily shrinking, and the political alignment between the US and Saudi Arabia will not last indefinitely. Over the longer term, a sustained period of lower prices risks underinvestment, setting the stage for supply to tighten.

There is also a growing consensus that 2026 could mark the start of a cyclical rebound in the global economy. Global monetary policy is more accommodative. The Federal Reserve has cut interest rates in each of its last three meetings and resumed asset purchases, with other major central banks either having already eased or signalling a similar path

Fiscal policy is also more supportive. The effects of Trump’s One Big Beautiful Bill Act are starting to feed through, Germany looks set to ease its fiscal handbrake, and Japan has signalled looser policy. China may yet join the party to bolster its struggling economy. All of this is unfolding against a background of largely resilient economic growth and inflation stubbornly above target.

So, whilst oil markets remain in surplus, the durability of this balance remains uncertain. Current supply levels and geopolitical developments may weigh on prices in the near term. But, if supply forecasts prove too optimistic, potential disruptions could lead supply to tighten. At the same time, policymakers seem prepared to support an already heated economy, a backdrop which tends to favour cyclical commodities such as oil.

Moreover, with equity markets at record highs, rising energy prices could become an underappreciated pressure point. That makes exposure to commodities, particularly physical oil and related equities, not only an inflation hedge but a potential source of portfolio resilience and meaningful upside. With prices low and sentiment deeply depressed, oil stands out as one of the most asymmetric opportunities in the commodity complex, a view we have started to reflect within the portfolio.

Articles by Harvey

Harvey East

Investment Specialist

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Piers Wheeler

Director – Institutional

T +44 (0)20 7963 8258

Developing and executing asset management strategy for capital raising and strategic relationship management. Coverage includes EMEA, Asia and Australia. Piers joined Ruffer in 2021, having previously worked with asset management firms including Eastspring, AMP Capital and LEK as a strategic consultant. He holds a MA from the Bayes Business School and a BA (Hons) from the University of Oxford.

Annabel Paterson

Senior Associate – Institutional

T +44 (0)20 7963 8123

Joined Ruffer in 2021, having graduated with a first class honours degree in land economics from the University of Cambridge. After two years working with the UK Private Wealth team and completing her IMC and CFA Level I qualifications, she now supports Ruffer’s global business development and client servicing efforts.

Articles by Annabel

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