Greg Smith: Devon Funds Management says oil prices could rise 70%

Global oil prices are forecast to increase in the wake of US airstrikes against Iran. 

Greg Smith from Devon Funds Management told Mike Hosking analysts are forecasting a rise in oil prices, from anywhere from 5% to 70%. 

Currently, oil prices sit at around $75 per barrel. But Smith warns prices could rise to $130 a barrel. 

The increasing cost of food around the world was also discussed this morning as the price of rice in Japan has doubled due to inflation.  

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Episode Transcript

Speaker 1 (00:00):
Devin Funds Management, Greg Smith. Welcome to Monday Mate morning,
Mike Ran, what do you reckon? Yeah, we're braced for
some volity. I think that's pretty much pretty much the theme.
So I guess there's gonna be a lot of eyes
on the oil price. As you mentioned, you know, are
we going to get a spike of sort of five
to ten percent or as we're going to go much
high as things escalate. So you know, we've seen some

(00:21):
predictions that prices could go well north of one hundred
dollars a bell, and no one really knows. It's currently
around around about seventy five. There's one major economics group
over the weekend that modeled a few scenarios, and now
you can the most severe case, we get to one
hundred and thirty hour use inflation goes to six percent.
So yeah, that's certainly not ideal and obviously would complicate
an already complicated picture for the central banks. Of course,

(00:43):
we had drone Power last week saying there and no
rush to cut rates. Rising all prices also will be
a handbrake on economic growth, and yeah, just let the
impact to board equity markets. You know, do we get
a bit of a risk off sell off. I suppose. Yeah,
there was sort of one point to sort of take
away that you know, we have seen shop like this
in the past without sort of understanding what's happening. And

(01:03):
markets have shown to be quite resilient. So you look
at where Middle East as sort of bubbled higher in
the past and past conflicts, your markets have tended to recover. Yeah,
regardless of what they do in the short term. So
you go back to the two thousand and three Iraq
invasion invasion the benchmark with ease and P five hundred
that fell nine percent in the week prior a couple

(01:24):
of months later it was five percent high, So I
have to fall in nine percent. So quite a useful
reminder from vices might not to be too spooked by
selling lids to pick up in volatility and the spot
of the headlines. It is often the worst time to sellers.
It was also proven the period since Trump's Liberation Day.
Obviously the mark old off in the aftermath and then
went on to rebound and then some So yeah, we
have to wait and see. Obviously plenty of interests in

(01:46):
those developments. Indeed, and I mentioned Andrew Bailey, so he's
not moving he's sitting at four two five, and yet
the retail sales down two point seven. That's material, isn't it. Yeah,
that's right. Yeah, the UK consumers not in sort of
great knack. I mean they had had a good month prior,
but not not so much, not so much in May.
So yeah, it was well below forecasts for a half
percent different retail sales and it was the biggest drop
since Decene betweeny twenty three. Food still sales particularly weak

(02:10):
and they were down five percent. So yeah, UK households
are scaling, expending and cost of living pressures and the like,
closing DIY sales they were down it as well. But
April been quite sunny, so that perhaps changed a little bit.
And yeah, UK shops they had splurged, but this came
to a real hult. And also on the volume side,
they were down one point three percent on a year ago.
That's the biggest drop since April twenty twenty four. So

(02:32):
eve it was pretty weak. Supermarkets said lower of volumes,
but yeah, other retailers were under pressure and that's also
what they've been reporting of late. So the interesting thing, though,
Michael thought was that on the same day there was
actually a consumer Conference. In the extra release GfK's one
and it actually rose two points, although needative eighteen probably
not too much to shout about. It was the best

(02:53):
reading since twenty twenty two. So there's a bit of optimism,
maybe the Genoa economic outlook, but everyone sort of still
seems to think that their finances are not in great shape,
and maybe they're also aware that the government's finances aren't
exactly tip top either. So UK public sector borrowing seventeen
point seven billion pounds in May. It's the second highest
for the month on record, highest spending link to you,

(03:14):
yesed it inflation? So UK public sector debt now ninety
six point four percent of GDP. So you won't ease
up the pressure on UK Chancellor Rachel Reeves, No, it
will not. Have you seen the price of rice in Japan?
It's double? God, yeah, double, isn't it? So it's absolutely incredible.
So the staple food, of course very politically sensitive, up
one hundred and two percent in May. So core inflation

(03:37):
in Japan two year high, up three point seven percent.
That's the fastest pace since January twenty thirty three. That
was above estimates. Cost of living inflation that's going to
be a big election topic next month for the government.
They've managed to sort of get their popularity up a little.
They've been trying to lower the cost of grain. But yeah,
the bag of Japan, they're certainly going to take an

(03:58):
interest in that print. I've been looking to raise interest
rates as long as the economy recovers and get inflation
back towards the two percent target, but it's actually been
above that for more than three years. Rates of course
are very low in Japan half percent, so a few
flies in the ointment. We haven't going to trade deal
yet with Washington, so they're waiting for that and obviously
their next economy so they really do need and talked

(04:19):
about that previously that they've got these obviously twenty five
percent auto turfs, so they want to see a deal there.
And yeah, the central banks or the Bank of Japan,
like other central banks, are split on how this is
all going to impact inflation. Are they going to see
cheaper Chinaese imports driving down prices or films generally just
going to raise prices and wages. So we'll have to see.
And of course now we have the oil price to

(04:40):
also sort of contend with, So yeah, a big week
for a number of economies. All right, numbers please, So
the day on Friday was actually up point one percent
fully two two zero six, the S and P five
hundred was down point two percent, and nasdek was down
half percent. For one hundred was down point two percent,
Nickey down point two percent, as was the A six
two hundred that finished at eight five zero far Indian

(05:00):
x fifty. Obviously, we were closed to the Mataiki gold
down two dollars three three and sixty eight US and
ounce oil close of course after their strikes, but prior
to that was up thirty four cents, consuming three spot
eighty four a barrel for WTI. And the currencies key
we lower against the US fifty nine point seven, fled
against the US dollar ninety two point five, down slightly

(05:21):
against the British pound forty four point four. Jepany gen
eighty seven point two's that was up point one percent
this week, Mike, we've got card spending with trade data locally.
We've got consumer conference here as well. I'm sure use
existing home sales, durable goods, use inflation. We've got Pow
testifying before SENATECE so that'll be interesting and we've got
doing some Pedix and Nike, but of course a lot

(05:42):
of interest on developments of Prospector around go well mate
Greg Smith, Devin Funds Management. For more from the Mic
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