Inventories are continuously drawn down across the full commodity complex. We believe that any potential supply constraints, even at the margin, will put upward pressure on prices.
During the quarter, oil prices pulled back over concerns of higher inventory levels. Oil prices dipped below US$50 briefly during March but ended the quarter marginally over $51. Our holdings in California Resources and Whiting Petroleum both pulled back materially with oil prices coming off. The two companies remain levered to higher energy prices. We believe the firms remain undervalued in an environment of $60 oil prices.
The performance during the quarter is consistent with the Portfolio Managers’ view that the global economic expansion appears to be gaining breadth. This backdrop is supportive of energy prices however precious metals holdings suffered a decline.
Funds managed by the Mackenzie Resource Team benefited from a rerating to energy equities during the quarter, whereas precious metal equities were roughly flat and materials equities were mixed.