There’s No Stopping the Energy Super Cycle
July 21, 2022
Read Time 1 MIN
Portfolio Manager Shawn Reynolds recently joined the UBS Market Moves podcast to discuss the energy transition and explain why we believe the new commodity super cycle remains in its early innings. While concerns about a potential recession have some investors questioning the near-term prospects of the energy sector, we believe it’s still early for this super cycle. Global energy inventories remain low as energy producers significantly cut their spending over the past several years, resulting in lower supply. At the same time, demand for energy continues to rebound and is closer to pre-pandemic levels, creating a supply-demand imbalance. Shawn explains why a modest recession is likely to impose more discipline on exploration and production companies, a dynamic that will help maintain tight supply (9:19).
Shawn also discusses the ongoing transition to renewables and clean technologies, which is likely to unfold over multiple decades and create a far-ranging opportunity set that stretches well beyond energy (23:25). The shift towards renewable energy is also creating soaring demand for a new set of commodities. Minerals like copper, cobalt, lithium, and nickel are essential components of clean technologies. However, with a greater emphasis on responsible sourcing of minerals, global concerns are now mounting over the geographic concentration of minerals extraction and processing. Shawn explains why we believe governments will incentivize the development of onshore supply.
Other highlights of the discussion include:
- 1:45 – Current energy market fundamentals and second half 2022 market outlook.
- 7:26 – Short-term risks facing energy stocks.
- 14:40 – Key takeaways from recent OPEC meetings.
Listen to the full podcast here: The Global Energy Landscape with Jay Dobson (UBS CIO) and Shawn Reynolds (VanEck).
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