Oil funds reach highest levels since financial crisis struck

The fortunes of the community’s £400 million-worth of oil funds on the stock market have improved since the turn of the year, reaching their combined highest point since the worst effects of the global financial crisis began to be felt.

Shetland Islands Council’s reserves were worth £232.3 million on Friday, some £18 million above their low ebb in March 2009, which once the “book cost” is calculated should see the total value of the reserves comfortably meet the SIC’s policy of maintaining the reserves above a floor of £250 million.

Shetland Charitable Trust’s hold­ings have been performing even better and stood at £174.4 million last Friday, some £40 million above the depths to which the investment market plunged 10 months ago – welcome news given the huge potential investments in the new Anderson High School and Viking Energy’s windfarm which the trust could be facing in the coming years.

It still leaves the combined funds some way below the £472 million they stood at back in May 2008, but SIC head of finance Graham Johnston welcomed the fact that investment markets had “hugely improved” since March last year. “That is undoubtedly a good thing,” he said. “It promises a degree of strengthening on our balance sheet for March 2010.”

He is less certain, however, as to what the future holds for the remainder of the year as the world economy continues its recovery from recession. Mr Johnston said it was difficult to know what effect governments withdrawing various mechanisms, such as high public spending, “quantitative easing” (injecting new money into the economy), tax cuts and scrappage schemes, will have.

“My view is that we may see a further five to 10 per cent increase in the value of equities (on fragile foundations) but the bond market prospects look pretty poor.”