1 July 2008

Alliance Trust says fundamentals driving oil price higher

Commenting on recent oil price trends, Angus McPhail, Global Oil and Natural Resources Analyst at Alliance Trust said:

“Fundamentals rather than speculation are driving oil prices higher. Oil markets remain tightly controlled by supply and demand. China is increasingly leading non-OECD demand, which is currently more than offsetting weakening demand from the US and other OECD countries.

On the supply side non-OPEC production is going through a period of sustained weakness with Russia being one of the largest casualties, which is now registering significant production declines.

Overall, OPEC production has risen with some additional production being brought on by the Saudis. However, most of these barrels are of heavier crude quality and have lower values attached to them and are therefore less likely to make a meaningful impact on the current oil prices.

Crude oil stocks remain low on a global level, particularly in the US, where they stand at well below the five-year average. We believe it is very likely that we will have to face even higher oil prices than the ones we are currently seeing. Rising geopolitical risk, hurricane risk, and rising industry cost inflation are all factors which could push prices to new highs over the next three months. Commodities excluding oil have risen considerably in the past year and although some speculative money has moved into precious metals we do not think that the evidence points towards a significant speculative bubble emerging in oil prices.”

Contacts

Jane Holligan, Media Relations Manager          Anna Schirmer / Stuart Lerman

Alliance Trust                                                   Lansons Communications  

Tel  +44 (0)1382 306064 Tel  +44 (0)20 7294 3605 / 3674

Mobile  07745 783212 Email alliancetrust@lansons.com

Email jane.holligan@alliancetrust.co.uk

Web www.alliancetrust.co.uk