After the Fukushima nuclear disaster in 2011, it was no surprise to see uranium prices tank.

In every corner of the globe, the bell was tolling for nuclear power – and the fuel that makes it happen – uranium.

But this past week, I jetted to California on an Oil & Energy Confidential research mission. While there, I met with Erlend Olson, an engineer whose work in the energy sector has given him insight into the uranium market and the players within it.

Here are the highlights from our conversation – including…

  • Why current downside concerns over uranium are overblown…
  • Three reasons why uranium market is headed higher…
  • Two companies in the best position to profit from the upward trend.

The Meltdown That Ended a Decade-Long Record

After the Fukushima disaster, the world was reeling…

  • The Japanese wanted to curtail production of nuclear power…
  • The Europeans wanted to ban nuclear power plants altogether…
  • The Americans wanted to put future power plant construction on hold.

The event hammered the uranium market and put an abrupt end to almost a decade of solid gains, as you can see in the chart below:

So where to from here?

Well you can forget about a continuing downtrend. I’m certain that the trend from here is going nowhere but up.

[ad#Google Adsense 336×280-IA]I met with Olsen because he’s been working with a unique technology that’s put him at the forefront of energy exploration.

Along the way, he’s tested his technology on various commodities – one of which is uranium.

And when we talked about the current state of the energy sector – and the prospects for uranium, specifically – he confirmed what I already know…

Three Reasons Why Uranium is Ready to Bounce Again

There are three major market forces that have me convinced that there’s a substantial base for uranium to move higher…

~ The Oil Equation: Those who argue against uranium and nuclear power are quick to point out that we have an oil glut.

Well, keep in mind that tight oil – the kind that’s pulled from the ground through fracking is an expensive and depleting resource.

The oil being extracted right now is only profitable as long as oil prices remain above $70 per barrel. And the long-term trend even has the oil majors questioning the commodity’s position.

For example, some oilfields that big firms like Royal Dutch Shell (RDS-A) have bought are subsequently being resold almost immediately. Why? Because the amount of oil projected to exist just didn’t make good business sense when the economics and exploration were considered.

Also, keep in mind that the well-publicized shale boom is not a global phenomenon.

Olsen and I agree that nuclear energy will grow in popularity, notwithstanding the current shift to natural gas and oil.

Why? Because…

~ More People = More Demand: The world needs energy – and lots of it – to keep it functioning.

Nuclear plants are being built in places like China that have no choice but to develop nuclear energy, in order to secure its future energy needs.

Think about fuel consumption: China consumes more fuel as country – over 20 million barrels per day (bpd) – than anyone else. Yet, on a per capita basis it lags the United States by a factor of almost 10 – 2.9 barrels per person per year in China, versus 21.5 barrels per capita each year in America.

If the Chinese ever reach per capita parity, the world’s current energy output won’t even be close to satiating demand. Needless to say, the Chinese aren’t hanging around, waiting for that day to come. They have no choice but to go nuclear. Another positive for uranium.

~ Goodbye, Glut: The end is nigh for the uranium supply glut. Thanks to the Russians’ speedy dismantling of nuclear warheads, most of the uranium that flooded the market has all been placed. Russia has already unloaded much of that material into power plants – the logical target.

Bottom line: As nuclear power consumption continues to grow in the coming decades, uranium demand will grow with it.

That trend bodes well for uranium companies that we’ve recommended here in the past – Cameco (CCJ) and Dennison Mines Corporation (DDN) – who are in prime position to benefit from this demand.

And “the chase” continues…

Karim Rahemtulla


Source: Oil & Energy Daily