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Just when everyone was starting to relax about energy prices, oil has suddenly decided to stop behaving itself again.
The price of crude hit its highest level this year on Friday, with a barrel of Brent ending the week at $61.51, as did a barrel of light sweet crude in the US.
It’s not the only energy source that’s soaring in price – one fuel of the future hit a new record last week…
The oil price surged last week as official figures showed that US stockpiles of refined oil had fallen sharply. The main reason was lack of refinery capacity – two refineries were down for maintenance, while a Valero refinery in Texas was shut down by a fire.
Fears are also rising over Iran’s uranium enrichment program. There has already been a worrying amount of press speculation over a possible follow up to the Iraq war, and clearly any disruption of supply from Opec’s second-most important producer would send the oil price higher.
The rising oil price comes at a time when Britain’s oil majors are stuck in a mire of bad news flow and general disinterest. We’d suggest that both BP and Royal Dutch Shell look like good value at current levels, particularly if oil continues its current rise.
But on to that other fuel source we mentioned earlier. The price of uranium hit $85 a pound last week.
Rising oil prices of course, put pressure on countries to find other energy sources. Despite the government’s recent troubles in court over the way it ran its ‘consultation’ exercise into the industry, countries elsewhere in the world are nowhere near as squeamish about nuclear power.
It’s thought that about 251 new nuclear reactors are being designed or are in planning across the world, said The Times. Many of these are in India or China – China in particular needs to find other ways of driving its economy forward, as the country has serious environmental problems already, caused partly by its reliance on coal-fuelled power plants.
These all require uranium – each new reactor needs 600 tonnes to get started, and 200 a year to keep running, says The Times.
So it’s no surprise that the price is soaring – and there’s an added supply complication with uranium. Analysts reckon the price could go as high as $100 a pound this week, when Canadian uranium miner Cameco reports on the latest developments at its key mine, Cigar Lake.
We wrote about the flood at Cigar Lake when it happened last year (you can read the piece here: Are we facing Peak Uranium?) At the time, uranium experts pointed out that losing Cigar Lake was the equivalent of the oil world losing Saudi Arabia. The mine will add 17% to the world’s uranium supply, says The Times – but the trouble is, no one knows when at the moment.
The news has boosted shares across the sector, making it harder to pick out potential winners – but there is one stock that might do well in the longer term, regardless of the news coming out of Cigar Lake – you can read more about it and the uranium sector in the current issue of MoneyWeek, out now.
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Turning to the stock markets…
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In London, the FTSE 100 index of leading shares closed above the 6,400 mark again on Friday, having gained 20 points to end the week at 6,401. Power generator Drax topped the FTSE leaderboard on rumours of a private equity bid, whilst oil and commodity stocks – including BP, Royal Dutch Shell and Xstrata – also performed well. For a full market report, see: London market close.
Elsewhere in Europe, the Paris CAC-40 closed 8 points higher on Friday, at 5,716, whilst in Frankfurt, Deutsche Telekom led the DAX-30 18 points higher to a close of 6,992.
Across the Atlantic, US stocks ended the week lower. The Dow Jones lost 38 points to end the day at 12,647 as stocks including Morgan Chase, General Motors and Microsoft – which was penalised for copyright infringements against Alcatel-Lucent on Thursday – weighed. The S&P 500 was 5 points lower, at 1,451. And the tech-rich Nasdaq closed at 2,515, a 9-point fall.
In Asia, the Nikkei closed at 18,215 today – a 26-point gain – having reached an intra-day high of 18,300.
The oil price was edging higher this morning, with crude 26c firmer at $61.40 in New York and Brent spot 46c higher at $60.40 in London.
Spot gold hit a nine-month high of $689.00 this morning, but had subsequently fallen back to $687.20. Silver had tracked gold higher and was last quoted at $14.66/oz.
And in London this morning, Pearson – owner of the FT and Penguin – announced a 19% increase in adjusted full-year profits. CEO Marjorie Scardino predicted increased profit margins in its schools and professional publishing units and pointed to continued strong profit growth for Penguin and the FT, with a 9% rise in the latter’s advertising revenue. Pearson shares had risen by as much as 7% in London today.
And our two recommended articles for today…
Why English football is top of the league
– Aside from staggering pay packets, what do the City and the Premiership have in common? Brian Durrant looks at how both have benefited from opening themselves up to foreign cash – and foreign talent. For more on the story behind what is arguably English football’s greatest success, click here: Why English football’s top of the league
Should you invest in Vodafone?
– There is one company which has been held by almost all British companies since 2000: Vodafone. Yet despite all the talk of growing emerging market demand, says Richard Benson, the outlook for the mobile telecoms sector isn’t great. To find out if Vodafone can buck the trend, read: Should you invest in Vodafone?