BlackRock Energy and Resources Income Trust Plc - Portfolio Update

The Company’s NAV (Net Asset Value) had declined by 3.8% in June (in GBP terms).

Economic data in June showed signs of decelerating global growth and easing inflation. This led the European Central Bank to cut rates for the first time since the start of the pandemic, whereas the Bank of England and Federal Reserve left rates unchanged. Elsewhere, there was increased political uncertainty as President Emmanuel Macron called for snap elections in France, leading to volatility amongst French stocks. US interest rate expectations declined modestly, with the US 5-year yield falling from 4.5% to 4.3% which supported the performance of growth sectors such as technology over value sectors like mining and traditional energy.

Within traditional energy, oil prices ended the period higher, recovering from May’s decline, but this masked notable volatility during the month with the Brent oil price down by 5% to $75 at the low point. At the start of the month, OPEC announced an intention to add back oil production later in the year, with oil demand expected to continue to rise and this was initially taken negatively by the market. The Brent oil price rose by 9.9%, whilst WTI rose by 6.2%, ending the month at $87/bbl and $82/bbl respectively. The US Henry Hub natural gas price rose by 0.8% during the month to end at $2.60/mmbtu.

Within the mining sector, most mined commodity prices posted declines through June, with iron ore (62% fe), copper and gold prices falling by 10.9%, 8.9% and 1.3% respectively. Economic data from China was weak with its manufacturing PMI below 50 indicating contraction, whilst average house prices recorded the largest year-on-year decline since 2015.

Within the energy transition theme, sentiment around renewables weakened during the month impacting the share prices of both clean power utility companies and renewable energy technology companies. Meanwhile, Bloomberg NEF’s Long-Term Electric Vehicle Outlook indicated that rapidly falling battery prices, advancements in next-generation battery technology and improving economics of Electric Vehicles (EVs) continue to underpin long-term EV growth globally.

All data points in US dollar terms unless otherwise specified. Commodity price moves sourced from Thomson Reuters Datastream.

25 July 2024