Mobius: Oil's fall is purely sentimental

Mobius: Oil prices are purely sentiment driven

Investment guru Mark Mobius has dismissed claims that an oversupply of crude is behind oil's selloff, and believes the end of the broader commodities rout is in sight.

"If you look at the supply and demand growth of oil in the last 20 years, roughly it's been 1 percent growth each year. But within each year, the [price] range has been plus/minus 5 percent," he told CNBC on Tuesday.

"The price is purely sentimental. It has no real relationship to long-term supply and demand."

Brent crude rebounded in Asian trade on Tuesday after losing 5 percent in the previous session, but still traded below $50 per barrel— its lowest level since January.

Mobius, chairman of Templeton Emerging Markets Group, a firm with over $880 billion in assets under management, also expressed disdain for price forecasts.

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"Nobody is an expert on oil prices, not even the top people in the industry. I sit on boards of some of these oil companies and their predictions are way off. They make plans based on where oil will be in the next year or so but with oil below $50, that's something nobody ever imagined."

Mobius' argument is in contrast to that of many traders, who pin oil's fate to the current oversupply, with the effect exacerbated by the fact that Iran—the world's fourth largest oil producer—has agreed to a nuclear deal that allows it to export crude again. Once Western sanctions are lifted, Tehran will be able to ramp up production by 500,000 barrels per day within a week, Iranian oil minister Bijan Namdar Zangeneh said on Monday.

Meanwhile, a survey last week by Reuters revealed July crude production by the Organization of the Petroleum Exporting Countries hit the highest monthly level since survey records began in 1997.

Be careful when investing

While Mobius does intend to reduce Templeton's exposure to oil assets if prices continue to sink, he encourages investors to take a broader view of the sector before making a call.

A worker stands next to a pump jack at an oil field Sergeyevskoye owned by Bashneft company north from Ufa, Bashkortostan, Russia.
Sergei Karpukhin | Reuters

"Look at the total picture of a diversified oil company: Marketing and refining are actually doing well at these low prices so you have to balance investments."

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Although low-cost producers are traditionally the principal beneficiaries of cheaper oil, Mobius warns that industry-wide firms are in trouble with prices at current levels.

Commodity endgame is near

On the bright side, he believes the protracted commodities rout, including that of oil, may be fading.

"We are beginning to reach the endgame in the commodity bear market because finally, people are getting the message of canceling projects which were planned at higher prices," he explained.

In particular, Mobius thinks precious metals including gold, silver, platinum and palladium could enjoy an upwards spike after dropping to multiyear lows in recent sessions.

However, overall commodity price fluctuations will continue in the short term, he warned.

Other experts also anticipate higher crude prices going forward, albeit for different reasons.

"Brent could drop back to its January low of $45, but that's the one final flush we get before prices move higher," Matt Smith, director of commodity research at ClipperData, told CNBC on Tuesday.

"We've seen demand tightening up, so it's case of demand-supply coming back in line and supporting prices."