The rapid move towards decarbonizing European energy consumption has become unstuck with power generation from wind and sun struggling to deliver the needed baseload. Adding to this the prospect for tight supplies, with stock levels at a multiyear low ahead of winter, and the perfect storm of price supportive developments have emerged.
The old saying that the best cure for a high price, is a high price, may to a certain extent ring true in the current environment. Not only do we risk that some industries could be forced to cut electricity consumption this winter, but also the recent rally to a record in Europe has seen prices catch up with those in Asia, thereby potentially reopening the prospects for LNG cargoes setting sail for Europe instead.
However, a very active US hurricane season has created supply disruptions in the US as well, and it has helped drive the Henry Hub gas futures contract to a 7 ½-year high at $5.24/MMBtu. However from a European supply perspective, a very active US hurricane season, most recently Hurricane Nicholas making landfall in Texas today, has been threatening to disrupt liquefied natural gas facilities on the US Gulf coast.
Uranium going nuclear: Another source of energy which has been on the receiving end of strong green transformation demand, is the uranium mining sector (URA:arcx). However following a strong surge during the first part of 2021 the sector’s advance started to slow in the realization the price of uranium U308 remained stuck around $30/lb. This stalemate however changed dramatically during the past month when the Sprott Physical Uranium Trust (U_UN:xtse) arrived on the scene. The Trust was created to invest and hold most of its assets in uranium, and during the past month it has accumulated millions of pounds of the physical commodity used to power nuclear reactors.