FEAR of the Trade War is fading - May 10

[dan_s]

As the FEAR of recession fades the price of oil should stabilize in the low $60s first and then drift higher because June thru August is the highest demand period of the year for transportation fuels. The outlook for U.S. and Canadian natural gas prices is very bullish. EIA's weekly storage reports will go from bearish to bullish in June and the utilities and LNG exporters will be seriously competing for supply. LNG exports from the U.S. will continue to set new records week after week and LNG Canada will be ramping up exports from the west coast in Q3 2025.
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The Trump Rally Has Begun, And These Oil Stocks Need to Be On Your Radar
Keith Kohl | May 09, 2025

It was kind of inevitable, if you’ve been paying attention to how our President operates. One by one, the dominoes are finally starting to fall since the trade war escalated a few months ago and the market corrected.

But do you really want to know when the oil market is signaling a bottom? When the fear is at its greatest and the blood is flowing freely through the streets, that’s the time we strike.

For us, the biggest flag occurred when WTI crude prices fell into the mid-$50s. No matter how devastating oil falling below $50 per barrel would be for everyone, it was a clear sign that the disconnect between investors and reality has peaked. < Global demand for crude oil will continue to increase for at least ten years AND the "Cheap Oil" has been harvested.

That’s why I told you to buy oil now and thank me later, because opportunities like that come but once every decade.

Stop and think about it for a moment, then you’ll see that we’re still in the early stages of this opportunity.

The fear over President Trump’s trade war lasting years pushed people to the brink of insanity. The moment that Goldman Sachs came out a few weeks ago calling for sub-$40.

Like I mentioned earlier this week, every hour that oil stays below $60 per barrel makes me more excited. So, imagine my lack of surprise when energy stocks — and our favorite oil stock specifically — shot to the moon yesterday after the first trade deal was announced.

Who would’ve thought that it was going to be the UK coming through with a huge trade deal that eliminates the 25% tariffs on things like steel, aluminum, and autos. Honestly, I didn’t have the UK succumbing first to the trade war on my 2025 bingo sheet… but hey, let’s take what we can get.

As you might’ve expected, the news was a shot of adrenaline mainlined right into the market.

Now, the UK by itself isn’t the driving catalyst for higher oil prices. Rather, it’s the optimism that more of these deals will be coming down the pipeline sooner and not later. Of course, the moment we see that all-important deal ironed out with China, then all bets will be off as a massive rally takes place.

Fortunately, it’s still not too late to enjoy the ride.

In the midst of the U.S.-UK trade deal, there was another piece of news that was swept to the side.

On Wednesday, U.S. Energy Secretary Chris Wright said that we’ll be immediately refilling our strategic petroleum reserves. He went so far as to suggest that the U.S. will be adding another 250 million barrels to the SPR, which were woefully depleted in 2022 by the Biden administration. < This will absorb 100% of the additional oil supply that OPEC+ needs to bring to the global oil market.

To be honest, I’ve been waiting for this piece of news to come out ever since WTI prices fell below $60 per barrel, and yet not many people seemed to have noticed this announcement.

That’s good news for us, believe me, because this move will add a ton of value on the most beaten-down sector inside the oil industry.

I’m talking about the upstream players that are collectively cutting capital spending across the board. Those E&P companies have not only taken the brunt of the price crash, but the weak oil price environment has ensured us that U.S. output is going to decline in the weeks and months ahead.

Look, lower output from U.S. fields IS going to happen — there’s no changing that right now. We’ve long passed the breaking point, and companies have already started cutting their capital budgets and reducing drilling activity.

"There’s an absolute fire sale taking place inside the oil sector" - Keith Kohl: Eight of our high-quality Sweet 16 companies (CIVI, CRGY, FANG, MTDR, OVV, PR, SM and VRN) closed below book value per share on May 9. All of them are free cash flow positive (even if WTI stays at $60/bbl) and they all pay nice dividends. VRN is a Special Situation because it will be merging into WhiteCap on May 12.

[aja57]

Rick Rule believes the small and mid cap drillers will get swallowed up by the big boys at an incredible discount. When is the question but $50 dollar oil makes it more attractive.

[dan_s]

Does he mean "Drillers" are "Upstream Oil & Gas Companies".

It will take "Lower for Longer" oil AND gas prices before most of the upstream companies are in real financial trouble.

Remember that all of the upstream companies that are in our three model portfolios survived the Pandemic during which oil and gas prices were MUCH LOWER than where they are today.