In 2012, Brent crude oil registered its highest annual average price in history. Supply and demand fundamentals suggest even higher prices moving forward. Yet many oil stocks can be found at prices well below their underlying fair values.

Globally, crude-only (excluding natural gas liquids) production has been flat for the last seven years, while demand is ever-increasing from the relentless growth and urbanization of our planet, assuring a favourable supply/demand outlook for producers for the foreseeable future. The fact that oil prices have remained high, notwithstanding a recession in Europe and Japan, slowdowns in China and India and rising U.S. production validates favourable worldwide supply/demand fundamentals for oil.