The energy boom is here
Energy demand continues to grow, spurred by growing demand related to data centres and also to emerging markets such as India. And yet US natural gas and global oil prices remain somewhat suppressed, given the near-term forecasts of continued increase in OPEC+ oil supply.
However, note that the OPEC+ countries have seemingly not been able to increase oil production in line with the increase in OPEC+ quotas in recent months. Note too the resilience of Europe, US and Canadian oil stocks in recent weeks. This is to some extent due to the strong refining margins that are being achieved in the downstream operations of integrated oil companies and also by refiners such as Valero, with 321 crack spreads in excess of $30/barrel at present.
European oil & gas sector hits a new high
Ultimately, there is no technology without energy. Data centres are remarkably energy-hungry, and are driving a US and global boost in electricity demand after years when developed market electricity demand has been flat. We already see the effects of this data centre demand growth in US electricity infrastructure buildout, with demand for gas turbines from companies like GE Vernova and Siemens Energy increasing sharply. These bulging order books are already reflected in the valuations of these two makers of power generation equipment, with PE multiples between 35x and 49x.
This electricity demand growth is setting off bull markets in a number of energy sources. The nuclear renaissance trend is already firmly entrenched, with the spot uranium price at nearly $80/pound from an early 2020 level of $24. But new nuclear energy power generation will be relatively slow to come online once idle reactors are brought back into operation in the US, Europe and Japan. China is the only country that is managing to install new nuclear reactors relatively quickly, over the next few years.
Uranium miners have rallied hard since 2020
Renewable energy will also have an important role to play, in spite of its status as an intermittent source of electricity. Solar panels are relatively quick to install versus other forms of electricity generation, but for the purposes of supplying a more constant flow of electricity to grid networks they will need to be…
