Top energy plays for the rest of the year… including a ‘behind-the-meter’

Since we last published Power Insider, U.S. crude oil dropped nearly $10 dollars per barrel before clawing back some of those declines. In the months since the Iran war began, oil has shifted 40% top-to-recent-bottom.

The CNBC chart above captures the chaos, as the back and forth drama continues around the Strait. As of this writing, it’s still not very clear what exactly is going on – or not going on – around Hormuz. The market continues to debate how much oil is coming out of the Arabian Gulf.  Kpler and its company MarineTraffic continue to produce must-see data for the energy markets, but U.S. Secretary of Energy Chris Wright says that more ships are leaving the region than some of the maps may suggest.

Meanwhile, the daily barrage of news and headlines continue. Wednesday, the terror group Houthis attacked a cargo ship in the Red Sea, killing six crewmen. At the same time, Iranian bosses put out a list of demands around Hormuz, one that U.S. President Trump quickly discounted. This is all happening while some in Iran also deny they are having any direct truce talks with the U.S.

My take → As I’ve been reporting for months, various factions inside Iran are vying for control. This is to be expected given nearly the entire Iranian leadership being taken out months ago.  As such, pay close attention to which leaders are saying what, and when. Conflicting messages are common and have been since the start.   

So even as oil has regained about $15 dollars from the July lows, crude is still holding below $100.   Many now are beginning to ask what has gone right with oil.  Given this is the largest supply shock in decades – if not ever – and it’s easy to make dire predictions, the worst case scenarios for crude so far have not happened.  Oil is $85, not $105.  

Note →  There are many types of oil sold around the world, and some blends have recently gotten close to $100.

JPMorgan’s Natasha Kavena lays out three reasons why the firm believes that oil prices have not superspiked:

• Inventory draws were much smaller than anticipated.
• China demand cuts.
• Supply responded faster and at a larger scale than expected.

When the history books are written on this, China’s falling oil demand may end up being the story. The remaining chapter to write is whether the multimillion barrel per day drop in oil use is related to the war and temporary, or here to stay. Time will tell.

To her third point above, Kaneva simply says, “the incentive to maximize output proved overwhelming, accelerating production growth across multiple regions and adding barrels back to the market.” Thank you, U.S. and South American production!

The team at Goldman Sachs has a slightly different view. It says the physical oil market is getting tighter. They highlight how visible stocks are down over 6 million barrels the last two weeks. Like…