VIDEO - Energy Update May 2019

The uranium sector was abuzz in May with company news, concerns over Iran enriching uranium and a slipping U3O8 spot price. 

At the beginning of the month, uranium major Cameco (TSX:CCO,NYSE:CCJ) received a tax court ruling in its favor. The company was awarded C$10.25 million from the Tax Court of Canada for legal fees stemming from a long-running dispute over tax reassessments by the Canada Revenue Agency.

The uranium producer also released its Q1 2019 results this month. Although the uranium spot price was flat for most of the first quarter of the year, Cameco is still optimistic that increased demand from the nuclear energy sector will help the spot price improve over the rest of the year.

During the first week of May, the US government issued a strict warning aimed at Iran and its allies, threatening sanctions and retaliatory measures if Iran continues to expand its nuclear capabilities. America also sent an Air Force bomber crew and an aircraft carrier strike group to the region.

The US has been increasing pressure on Iran since pulling out of a multi-nation uranium pact last year.

Quarterly uranium production in the US and Kazakhstan is down so far in 2019. US output dropped by 74 percent due to fewer US-based sites being in operation, while Kazakh output was down 4 percent.

There is some speculation that the American decrease was caused by the sector awaiting the results of a Section 232 investigation on uranium. Many electricity companies that usually purchase their supply early in the year have yet to come to market amid the investigation.

Mid-month, Horizons ETFs Management launched Canada’s first uranium ETF. It began trading on the Toronto Stock Exchange on May 16 under the ticker symbol HURA and is currently trading at C$10.03.

The last week of the month saw increased tension between the US and Iran, with reports out of the Middle East stating that the country has quadrupled its enriched uranium production.

Tweets from US President Donald Trump only seemed to exacerbate the issue, which remains ongoing.

The current U3O8 spot price is US$24.65 per pound, down from last month’s price of US$25.75.

In the oil gas sector, things were less eventful, but numerous reports were issued over the month.

In early May, the International Energy Agency (IEA) released a report noting that energy investment was up worldwide in 2018, but the oil and gas sector wasn’t the primary recipient of the new capital.

According to the IEA, US$1.8 trillion was spent last year on energy investment; however, while “global energy investment has stabilized, this was the third year in a row the power sector attracted more investment than the oil and gas industry.”

Another sector-wide report released by the Westwood Global Energy Group paints a bleak picture for oil and gas exploration. The report notes that, while exploration has remained relatively steady, the success rate of discoveries has fallen dramatically.

The current price of Brent crude is US$65.67 per barrel, and West Texas crude is US$56.95.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.