Take your pick – Thorium or Uranium

While I have hinted that I am bullish on nuclear energy and uranium……I have been an avid watcher of thorium which has been seen as a nascent alternative but in truth it has existed for some time. Its evolution has been retarded for a host of political and capitalist reasons.

An extract from this article says, “China has some of the world’s largest reserves of thorium, a silvery metal with weak radioactivity. By some calculations it has enough to meet the country’s energy needs for at least 20,000 years. By contrast, China has some of the lowest uranium reserves of any nuclear-capable country”.

https://www.neimagazine.com/news/newschina-moves-forward-with-thorium-molten-salt-reactor-8919220

Still looking for lower oil prices

Brent Crude has fallen 12% since my note (3 weeks ago) called a peak.

Last night’s 6% decline (to $68.75) suggests and adds a little more strength to the downward trend.

The two links below discuss my bias for lower prices.

For now the $62 mark is a spot to watch and certain technicals over the coming weeks will help me decide if a new Long position is established there or around the $57 level.

July 20, 2021

by Rob Zdravevski

rob@karriasset.com.au

Energy’s diminishing index weighting

“By the end of 1980, six out of the top ten companies by market capitalisation were energy related related as was one third of the S&P 500” – Goehring & Rozencwajg

40 years later that landscape is very different.

Today, the energy component of the S&P 500 is 2.8%. The lowest on record.

A Suez Crisis and higher Natural Gas

In Egypt….

two Presidents have been removed from power,
human rights are being violated,
christians are being suppressed and
people are being killed whilst protesting

What if the Muslim Brotherhood (an Iranian proxy) takes power in the world’s most populous Arab nation which borders Israel and straddles the Suez Canal?

Will this make the world nervous?

It’s possible that we see Western intervention to correct matters and protect their billions of dollars spent on military aid over the decades.

Oil prices will probably rise further but I’ll speculate that Natural Gas prices will rise more so.

The price of Natural Gas have been falling for years but I think this will reverse.

When oil becomes more expensive, I think demand for cheaper alternatives such as Natural Gas will be sought and oil won’t be the only fuel source that buyers will settle for.

Furthermore, I expect gas projects (including American shale) will not come on-stream as quickly as expected, due to the rising cost of capital and overall cost overruns.

It is rare that when a commodity is in high demand that it stays cheap for too long.

A freeze of a different kind

Over the weekend, the European Central Bank (ECB) decided to steal up to 40% of the bank deposits held in the Cypriot banks above EUR 100,000.

This will specifically affect a large amount of Russian owned deposits. Moreover, the Russian government was humiliated over the weekends decision for they were not consulted after having been courted earlier in the week.

Furthermore, when banks re-open, capital controls will most likely exist to prevent the free flow of money out of Cyprus.

I think Europe themselves needs to prepare for a different type of freeze.

Come this winter (December 2013-Feb 2014) I would expect Russia to re-coup some of “their” money by turning off the gas pipelines to Europe.

Energy prices will rise, utilities will be affected and the consumers pockets will be hit.

A population doesn’t like being hungry and especially freezing cold. Watch out for any growing social backlash against Europe’s politicians.

 

 

Hope equals complacency

Something that I have difficulty explaining tells me that the Cyprus situation can’t end well. This feeling is biased by the complacency exhibited by European politicians.

Loosely, there is an assumption it will be fixed by somebody. Almost a similar feeling that permeated prior to Lehman Brothers collapsing. There is also a distancing by Germany, that someone else will save Cyprus.

Keep in mind that Angela Merkel has an election in September 2013. Why would she use German money to save Cyprus following the backlash she experienced in Greece.

But here come the Russians.

I have read that $40 or $50 billion of private Russian deposits sit within Cyprus’ offshore banking haven.

Here is how you would do a sovereign bailout deal.

For a $10 billion bailout, Russia gets to protect its citizens deposits in Cyprus, take over a huge slice of Cypriot debt (which they’ll eventually make a profit from, as it’s currently trading at 65 cents in the dollar) and take ownership or security over Cyprus’ Aphrodite gas field.

The Aphrodite gas field has natural gas reserves of about 7 trillion cubic feet (tcf) worth around $45 billion. That is enough gas to meet the energy needs of 7 million households for 20 years. Cyprus only has a population of 1 million people.

Incidentally, Aphrodite sits next to Israel’s larger Leviathan (16 tcf) and Tamar (8 tcf) fields.

It possibly makes for some interesting scenarios involving the politics of Israel, Lebanon, Turkey, Syria, Iran & Russia????

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