Banks predict oil price slump under Trump Admin

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Michael Tanner: [00:00:14] What’s going on, everybody? Welcome into the Thursday, August 1st, 2024 edition of the Daily Energy News Beat stand up. Here are today’s top headlines. First up, power hungry data centers are gobbling up Texas amid a AI boom. Sticking in the great state of Texas, Texas pipeline congestion would throttle U.S. exports at a critical time. And finally, Russia and Iran to start work on game changing energy corridor and be talking a lot about the Middle East today. Unfortunately, stool then tossed over to me. I’ve got a pretty long segment covering one. What’s happening with oil and gas? I mean, up big after geopolitical tensions rise in the Middle East. So we’ll we’ll cover all of that. Yeah, yeah. Drops. We saw a nice little inventory draw. So we’ll cover what that means. We got to talk cash earnings. They beat based on a pretty expansive increase in guy on output relative to the guidance. We’ll then check in with BP’s earnings. They’re also up after they beat earnings. But something super interesting when you dig into the numbers and look at their low carbon and gas division. So we’ll get a good chip out of that. And then great opinion piece here. Why Citibank thinks Trump is bearish for oil stew. And I will go back and forth on this one. A lot of great stuff and a lot of a lot of great stuff in there. So guys we will cover all that. The bag of chips guys. As always I’m Michael Tanner joined by Stuart Turley. What do you want to begin. [00:01:42][87.5]

Stuart Turley: [00:01:42] Hey let’s start with our power hungry data centers are gobbling up Texas amid AI boom. I’ll tell you what. You can’t. Hey, AI has changed the game around here. It is just unbelievable. Let me read just a little bit of this here. Texas Soaring Energy needs the state’s grid by 2030. Will need to support 152GW of demand on peak days. Listen to this, Michael. Almost double what it can hurt currently handle in just a few years. It is not going to happen. The grid infamously, infamously or infamously buckled during a cold snap in 2021, leaving 4.5 million without power. Here’s where it says I’m concerned about data centers and the consumption of power as AI consuming becomes part of the everyday life. Miss producer, if you could bring up this graphic hottest server farm markets, take a look at this Northern Virginia and then you take a look at Dallas Fort Worth. Michael, two months ago, Dallas Fort Worth or excuse me, Houston was the first time that we’ve had more financial people than New York. And so Houston has done a great job bringing in a lot of the finance markets. Well, the data centers follow finance. [00:03:06][83.6]

Michael Tanner: [00:03:07] Yeah. No. And I mean, it’s a boon for Texas because if AI is really going to be the next thing, bringing all of these jobs here, bringing all of these data centers years is good. We do have the some of access to some of the lowest cost energy. When you talk about stranded natural gas, you talk about all this stuff. The real question is, will Ercot, as you mentioned, be able to handle this? Because I’m not convinced we want to put Ercot in charge of making sure our data centers are up. And, you know, but that’s a story for another. Definitely don’t want CenterPoint energy in charge of them. I would want that. [00:03:39][31.8]

Speaker 2: [00:03:39] There’s a couple things about this. And that is Governor Abbott says that he may he’s going to have a $10 billion energy fund to double the 10 billion energy fund. He’s going to have to do. Think about that. The the advantage that Texas has is we have natural gas and we can spin up a natural gas plant a lot faster than just about anywhere else in the country. So I have to hand it to Texas. Texas may be able to do this. Governor Abbott may be able to do this, but there is a lot riding on this thing. [00:04:12][32.7]

Michael Tanner: [00:04:12] Yeah there is. All right. What’s next? [00:04:14][1.5]

Speaker 2: [00:04:15] Speaking of Texas, love me some Texas Texas pipeline congestion could throttle U.S. exports at a critical time. Retro Texas crude pipelines are nearing capacity, with major pipelines between the Permian and the Port of Corpus Christi. Michael running at 90% for. Holy smokes, Batman, you take a look at that map of pipelines, and they you can’t swing a dead cat in Texas without hitting a pipeline. And they’re running at no. [00:04:46][31.7]

Michael Tanner: [00:04:47] But we still can’t get our gas to market, which is kind of funny. [00:04:49][2.7]

Speaker 2: [00:04:50] It is. There’s some big, big holes in that from the Permian to Corpus and getting them out there. But Haynesville does not have that. But they’re expensive. More. It’s a whole different market for drilling over there. [00:05:01][11.3]

Michael Tanner: [00:05:02] Yeah. Shout out to the deal. Spotlight episode number eight that I just did with John Farrow. I’ll be will actually be doing a full marketing blast here. Early next week on it, but you can go check it out on her YouTube right now. We talk a lot about this, specifically in the back and that deal that Devin did to go set up Grayson Mill. A lot of what that did was, was get that, you know, Grayson Mill has an extensive midstream capacity that they own their own pipeline infrastructure, which is great. I’m a big fan of turning a cost center into a revenue source. Gotta love that. But the problem is a lot of it’s not connected with where Devin is. So the point of all that is, why is it helpful to own midstream infrastructure? Well, if you can if if you’re not allowed to flare, you gotta put your gas somewhere so you can produce the oil. It’s not like you can just produce the oil and not produce the gas. So a gas take away not to make money on it because at $2 natural gas, no one’s making money on it, right? It’s the ability to get your gas to market. And I think that’s what I think. That’s the key thing here. I think it’s what East Daily Analytics, we love them over there is really saying in this in this in the article. [00:06:06][64.2]

Speaker 2: [00:06:06] Right now, one of the things that I would definitely want to do is take a look at data centers in east in West Texas. I’d put a data center in Midland near the Permian, where you got all the offtake you could ever want sitting out there, I guarantee you, because you’re going to have microgrids popping up for data centers. That would be a big one. [00:06:28][21.6]

Michael Tanner: [00:06:28] Yeah. No. Absolutely. All right. What’s next? [00:06:30][1.9]

Speaker 2: [00:06:31] Hey, let’s roll over to Russia and Iran, start work on a game changing energy corridor. Michael, this is at the heart of our discussion in a lot of ways. Is that the Iranian petroleum minister? I’m going to butcher his name. I’m. I almost sound like Scooby when I say it. I have no idea how to pronounce it. Russia and Iran will start working on energy corridor is now $40 billion. Four pronged deal. An agreed in principle between Russian Gazprom and the state owned National Iranian Oil. But it’s also with China for complete in the Asia market for Russian and natural gas and Iran really helping out in their unbelievably huge. [00:07:19][47.6]

Michael Tanner: [00:07:20] Well it because there’s and and now speaking about what’s going on with all this geopolitical craziness that’s happening in the Middle East right now. This means more than anything, I mean, this $40 billion dollar deal with Gazprom has core four elements, all which are critical to kind of tightening up that relationship. It’s a 20 year deal, which is which is pretty nuts. [00:07:43][23.4]

Speaker 2: [00:07:44] It is. And when I was talking to George McMillan on the the geopolitical expert, it’s about the U.S. trying to shut in Russia from pipelines. Well, Putin has outplayed United States in chess and has got pipelines all through China coming around to North Korea, South Korea and Japan. And then you’re starting to look at all the others around here. And then in this area, it’s really putting the wealth for Putin where it is. I mean he’s got a long term contract now. [00:08:17][33.4]

Michael Tanner: [00:08:18] Yeah. No, he he really does. And it’s it’s getting spicy. Who you know Moscow and Tehran are becoming close friends now. [00:08:24][6.7]

Speaker 2: [00:08:25] And Iran’s flying the red flag for revenge and holy smokes. [00:08:29][4.1]

Michael Tanner: [00:08:30] Well let’s let’s jump over to oil and gas finance guys, because we got a lot to talk about specifically when it comes to this. But before we do that, guys, as always, the news and analysis that you just heard is brought to you by the world’s greatest website, Energy News beat.com, the best place for all your energy and oil and gas news doing the team do a tremendous job making sure that website stays up to speed. Everything you need to know to be the tip of the spear when it comes to the energy business. Hit the description below for all the different links to the articles. Links to the timestamps so you can jump around back and forth. Timestamps might be a little off because we’ve got some ads running. Sorry, we’re trying to make a little money here, but then you can also check us out on Substack where you can get early access to all these articles. Obviously, we’re recording this at night, as you can see on my screen back there, if you’re watching on YouTube. And so it releases in the morning, so go check that out. Also, if you’re interested in any of our oil and gas investment opportunities, hit the link that we have in the description below. We’ve got an awesome project that we’re working on right now with our friend Ray Trevino over at Crude Truth. Lots of great stuff going on over there. Go ahead and hit that link below to get access to the executive summary, and book some time to talk with us specifically about how you get how you can get involved with oil and gas investing by skimming pretty, pretty crazy from from an oil price standpoint. [00:09:47][76.9]

Michael Tanner: [00:09:47] And let’s quickly just cover overall markets today S&P 500 up 1.5 percentage points. Nasdaq and Big Tech up three percentage points, mainly off the back of Jerome Powell. And the US fed deciding to hold off rate cuts this year. But saying that in September it’s likely that we will have rate cuts if trends continue. We’ll go ahead and read a few quotes from here. I don’t think the label market is in current state as a likely source of significant inflationary pressure, so I would not. So I would not like to see material further cooling in the labor markets again. The fed decided today to hold its benchmark rate at its target range of five and a 4:45 and a half percentage points. It most likely, as they will probably be at 25 basis points cut, where that target range will be now 5 to 5 and a quarter. He also said that a potential 50 basis points rate cut is, quote, not something we’re thinking about right now. The FMC, which is the Federal Open Market Committee, they’ll go ahead and meet in September 17th and 18th, as you mentioned before the show, right before the election. Yeah, aptly, time is a few months before. So there’s there’s time to no time. Time for things to settle. We also will see Jerome Powell speak at the Jackson Hole Economic Summit in late August. So we’ll get a little bit more there. That’s really again, what we’re seeing with the with the two top line. We did see the two and ten year rates drop two point. You know basically about two percentage points ten year yields 2.1 percentage points. Bitcoin down 1.75 percentage points. Crude oil up 5.1. Percentage point 7853. Big day after three. Basically three days of losses three straight days of down. We have, you know, opened the day below 75 or basically at $75. Now we’re sitting at 7852. Unfortunately the reason for that it’s a three letter word. Or we’ll talk a little bit with Stu. Let me get through these numbers here. Then I want to bring you in Stu talk. Brant oil was only up 1.4 percentage points. Natural gas was down 3.9 percentage points. Just $2.04. You know, I want to hear from you about what’s going on in the Middle East. But first, I do wonder if we just throw up the EIA numbers here. One of one of the probably smaller reasons oil prices is up is that we saw a drop of 3.4 million barrels from the crude oil inventory reserves. That’s up from about 3.7. And where analysts were expecting what we saw last week. So not terrible gasoline stocks shed a little bit. And 43. 7 million barrels on the stock drop. Distillates build about 1.5 million barrels. We had a stock decline last week. Very very interesting. But you know the big news for oil prices, stew is, is one the fact that Hamas political leader. I’m going to I’m going to butcher his name. Who really cares? He was killed in Iran, most likely by Mossad and Israel, and that which has just sparked a massive amount of of interest stuff going on in Syria. Talk us through what’s going on geopolitically, because the craziness right now that that’s been that that’s been the Middle East in the last 48 hours is really what’s causing this, this price increase. [00:13:01][193.4]

Speaker 2: [00:13:02] I’m nervous. In fact, it is it is not good when you have our current white House not talking to Israel. And Israel went into account, the leader, the Hamas leader in Tehran. Holy smokes. [00:13:17][15.5]

Michael Tanner: [00:13:18] Hey, don’t worry, AP was quick to say it was an assassination. [00:13:21][2.6]

Speaker 2: [00:13:22] Oh yeah? Well it doesn’t. [00:13:23][1.3]

Michael Tanner: [00:13:23] You know, this is six days to get Trump assassination, right? [00:13:27][3.3]

Speaker 2: [00:13:27] Oh yeah. [00:13:27][0.3]

Michael Tanner: [00:13:28] When the Hamas political leader gets assassinated, they’re hot on the presses. [00:13:32][4.2]

Speaker 2: [00:13:32] Oh, yes. And and so and and I s on Twitter. He is an absolute jewel. He’s asking the same questions. How will Iran spawn and how will the who these respond? How will Hezbollah? Turkey is who we need to watch. Turkey is a NATO member and Turkey is calling for the head of Israel right now. So they are the one to watch there the boiling point, not ayran Iran. It’s Turkey that’s getting upset. [00:14:03][30.1]

Michael Tanner: [00:14:03] Yeah, pretty pretty crazy. I mean, it’s. [00:14:05][1.9]

Stuart Turley: [00:14:06] Why. [00:14:06][0.0]

Michael Tanner: [00:14:06] IG analyst Tony Sycamore this is a quote out of order. I think putting it all together certainly raises the chances of escalation in the Middle East. Talk about, you know, of course it does. I mean, that’s his most one of the most obvious statements in the thing, worth noting is, well, that after three straight weeks of declines, long position from speculative accounts of crude oil have been reduced. Hence, conditions are ripe for a rebound. You know, pretty, pretty nuts. I want to move over, though to two earnings reports. One has beating earnings estimates on pretty crazy Guyana output. Well kind of top line numbers here has reported Q2 2024 non-GAAP earnings per share at six at $2.62, which beat Wall Street consensus by about $0.07, while 3.26 billion of revenue was good for a 40% year over year growth, although it did miss their consensus by 30 million. But at four at 3.2 billion, 20 million is is just a rounding error. Massive profit increases Q2 net income was 757 million, or $2.46 per share, compared with net income. Come up to 119 million for Q2 of 2023, so a huge increase. Adjusted net income came in at 100 and $809 million, compared with 201 million last year. Really, the reason for this was because production increased to of about 27.6 percentage points, 494,000 barrels of oil per day, and that’s thanks in large part to a 75% year over year increase in Guyana. A year ago, they were doing about 110,000 barrels a day, and now it’s up to 192. And shale output was about two 212,000 per day, which was up about 17%. They did say that they do expect their production to fall in quarter three, as they expect multiple downtimes in Guyana, and their Southeast Asia asset looks like they’re going to be doing some natural gas tie ins. I mean, again, with God, it’s a long year. You’re talking about a ten year development plan. So these things are going to happen early on in the life of these development plans specifically, so we can make sure all the infrastructure is set up as obviously has is still locked in this, he said. She said battle with Exxon and Chevron after agreeing to be acquired by Chevron. But Exxon coming in and saying no, we have a refusal on this. Again, go check out the deal spotlight I did with Bennett Williams great episode where we dive in to all of that BP also great earnings stu, but what’s funny is there’s some interesting little nuggets in here. So let’s read some of the top line numbers here. BP reported a stronger than expected net profit for the second quarter, which actually beat analysts projections. Firm’s profit. The profits were about 2.8 billion, which beat analyst expectations of 2.6 billion. They announced about a 10% increase in the dividend hike their share buyback program. What’s also funny, though, is their low carbon and gas division, if you read down closely, actually performed pretty horrible, losing 100 million a quarter. So profits up. But low carbon divisions I mean, are we shocked? Are we sure. [00:17:10][183.6]

Stuart Turley: [00:17:11] The more we go renewable, the more fossil fuels we will use. [00:17:14][3.5]

Michael Tanner: [00:17:15] Absolutely. You know, it’s pretty pretty crazy. You know, this is kind of the first, you know, second earnings report for Murray Action Close who’s the firm’s new CEO. That took over basically beginning of the year. His quote was our business continues to operate safely and efficiently. Who cares. I mean that’s I mean, yes, you want to operate efficiently and safely, don’t get me wrong. But I love that. If that’s the first thing you got to say, maybe it was an underwhelming quarter for you. You know, they also went ahead and and gave him a final investment decision on their condition, development in the Gulf of Mexico, which is which is pretty great. That’s a big project which should add huge amount of oil and gas to their underlying guidance. But, you know, BP, it continues to be a shift back to oil in and away from low carbon. Yeah. Last one here Stu. Why Citi thinks Trump is bearish for oil. Super interesting here. You know with with you know we’re about 100 days away from the presidential election. And we end with, you know Kamala Harris recently replacing Joe Biden as the presumptive Democratic nominee. The real thing that I think is on everybody’s mind is, okay, how is the oil and gas industry going to fare under each of these candidates? I think, you know, with, with with Vice President Harris, she’s going to have to really either come, she’s going to have to come on and take a stance on fracking. I know she’s in the past, said she would ban it. She’s flip flopped a little bit. You know, I mean, only banning fracking is only going to increase oil prices. I mean, it’s that’s that’s what’s hilarious. They, they they think banning fracking is all of a sudden going to send oil to zero. It’s going to do the exact opposite, because now no one’s going to build the drugs. You you basically just turn off the Permian. If you do that, that will never pass. You will never pass a fracking ban. So I mean, let’s just throw that out there. They can they can say that all they want, they can virtue signal all they want, but they’ll never get that passed. But what Citibank is saying is, is their new report that really the that really if, if, if VP Harris gets elected all is going to be well and good for the oil and gas business. But another Trump presidency quote could be bearish due to three things trade tariffs, oil and gas friendly policies and deregulation and pushing OPEC to release oil into the market. Okay. So stew, those are the three things they think are why oil’s bearish I want your thoughts on because I’ve got an issue with one of them specifically. [00:19:32][136.7]

Stuart Turley: [00:19:33] One I got. What is him saying. Push OPEC plus to release oil. And in the market is effing bullshit. And effing is as swear worthy as I’m going to get on this. And I want to drop an F-bomb so bad because this one. [00:19:48][15.9]

Michael Tanner: [00:19:49] Friendly, podcast. [00:19:49][0.4]

Stuart Turley: [00:19:50] Family friendly podcast. And I’m worked up, baby, cause this is ridiculous. Okay? But this is absolutely ludicrous. Michael. They can. Trump would turn our great oil and gas empire operators loose and it would absolutely drive. Prices down. I mean, and that’s what they’re saying. [00:20:12][22.5]

Michael Tanner: [00:20:13] I would I agree with the overall analysis. I think that Paris wins. The oil industry will be it’ll be business. [00:20:20][6.6]

Stuart Turley: [00:20:20] I want to back this up. For one thing, I don’t think Harris is going to be on the ticket. I think they’re going to change out the ticket now. We does. That does not mean anything else. It will still be the Green New Deal and the policy. She is not writing the policies. They’re writing the policy. It’ll be someone else. So that being said, the people writing the policies are going to go after and ban fracking on federal lands. Where does that impact that impacts the Gulf? [00:20:51][30.7]

Michael Tanner: [00:20:51] Well, prices will just go up. I mean, here’s the thing. Any Democratic nominee that wins, right? The it’ll be business as usual for the over the look at what’s happened the last four years. It’s going to stay the same no matter who it is. Bob Iger. [00:21:03][11.6]

Stuart Turley: [00:21:04] While. [00:21:04][0.0]

Michael Tanner: [00:21:04] A hair is structurally don’t matter who ends up winning. [00:21:06][2.5]

Stuart Turley: [00:21:07] And they won three dozen cousin really $3 trillion a year to go to climate transition. [00:21:13][6.8]

Michael Tanner: [00:21:14] I saw on Twitter today did you hear what they said. They said it’s not really about climate change. It’s about reorienting, reorienting the U.S. economy. I mean, they came out and said it today, and it’s not about it’s about climate change, but it’s really about shifting the economy. So but okay, I agree with you overall. Now, I think that if Trump wins, you are probably going to see a decline in oil prices for first, I think two reasons. One, I agree with their first statement due to trade tariffs. Two, I do think he’s going to have friendly policies, which is going to continue to increase production. But three, I do not believe that OPEC will do what they did in 2014 and release oil into the market to tank us, because why did they do that again? They did that in 2014 to hurt U.S. shale and take back market share. Problem is, though, they hurt themselves in the process. And what has NBS one he want to do? He wants to shift the economy away from oil and gas and into a more balanced economic problem, because they spend a lot of government money. You want to him, a lot of government money gets spent and that all comes from oil. They need what is it, a $100 oil to balance their budget because they’re investing so much in an attempt to get them, they’re happy. It’s a catch 22. In order to get off oil, you got to drive prices up so that I don’t think they’re going to release and just completely do a 180. I think they’re going to say cooled U.S. is going to produce more. Maybe we can even hold back more because again, they want higher oil prices. Again, I do think prices will go down. Obviously, we heard, you know, at the RNC convention drill baby drill. We love it again. It’s going to be good for workers. It’s good for the overall economy when energy prices are low. So I’m not saying it’s a bad thing. I mean it’s $3.50 right now for gas. Love a buck 80. I’m not saying I wouldn’t want to go fill up my truck for a buck 80, but if you’re an if you’re an upstream oil and gas, prepare yourself. I’m actually in the process of a white paper on this right now. How to prepare yourself as an oil and gas upstream company specifically to handle this type of stuff. Now, obviously there’s other factors that go in, but the volatility that’s going to come to the oil and gas business, especially if president former President Trump does win, which I think I think I think he will if I’m a gambling man, I I’d put my money on that. So assuming he survives until then, you know, that’s all another conversation. But I just think it’s going to be prepare yourself. I mean, now there’s the other side of the equation where, you know, we’re seeing a lot more NGL. So all of this oil that we’re announcing is oil. It’s got a lot of LNG in it. So yeah. You know what I mean. [00:23:57][162.2]

Stuart Turley: [00:23:57] Yes, I think MDS in Saudi Arabia has a lot more to worry about than trying to pick a price war with the US shale. He’s got Russia trying to pump out the Russia’s actually had a lower the lowest amount that they have produced in the last 11 months. This month is the lowest that they’ve they’ve produced. This is pretty significant. But you have the other quotas. The other OPEC plus members are overproducing to in order to make their budget numbers. You have China buying all that they can from the dirt fleet because they’re going to go to war. If there is a war going on in the Middle East, they’re going to take Taiwan. I guarantee you watch out. And they they’re raising the roof on their largest LNG storage. So their oil storage and their LNG storage is being built up. What happens when countries build up supply? [00:24:57][60.1]

Michael Tanner: [00:24:58] Yeah. No. Absolutely. Absolutely. So I think it’s going to be crazy. But it’s going to be crazy. So we’ll make this happen. So what Alcides it’s been a great week. Last show of the week. So we’ll it’ll be good. [00:25:08][10.4]

Stuart Turley: [00:25:09] Oh yeah. It is. And I want everybody to stay safe out there and have a plan. No. [00:25:14][5.0]

Michael Tanner: [00:25:14] Absolutely. So. All right guys, with that, we’ll let you get out of here. Have a great weekend. What are they going to hear a Friday on the podcast. [00:25:20][6.0]

Stuart Turley: [00:25:21] I’ve got a podcast coming out with, Ronald Stein, a great friend of the podcast. He’s he’s just a cool cat. [00:25:27][6.5]

Michael Tanner: [00:25:28] Good old Ronald Stein. All right. And then you’ll hear the weekly recap on Saturday. We’ll take Sunday off and be back in your ear on Monday, guys. We’ll be have a great weekend. Enjoy the podcast on Friday, enjoy our weekly recap on Sunday and we will see you on Monday, folks. [00:25:28][0.0][1486.1]

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