Far East Capital Newsletter
Oil market takes the focus while uranium is gathering momentum
25 Apr 2020

In This Issue

Oil market takes the focus while uranium is gathering momentum

Last week we saw the virus deliver the killer punch to the oil sector. Just like we recently experienced negative interest rates for the first time, last week we were witnessing negative oil prices on near term futures contracts. All of the storage facilities are chocker block with oil and no-one has any spare capacity.

There is good cause to be short term bullish on the fundamentals of uranium. Cameco has shut down the Tier 1 mines at McArthur River and Cigar Lake while Kazakh production is being curtailed, such that we see about 50% of mine supply being shut in at present with no prospect of being restarted until the uranium price is much closer to US$40-50/lb. This is the long term price needed for profitable operations.

So, we are actually seeing an acceleration of the tail end of the uranium cycle, causing the uranium price to increase from US$23/lb to US$33/lb in the space of a month. The nature of the market is switching from being inventory dictated to one of production constrains. It is looking like a momentum play now with expectations that the uranium price could hit US$40/lb by the end of May.

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