Energy Updates- 9th Feb
As soon as Trump took office, he declared a national energy emergency, signaling his goal to boost energy supply growth with his "Drill, Baby, Drill" policy. Oil prices$United States Oil Fund LP(USO)$ and energy companies$Energy Select Sector SPDR Fund(XLE)$ corrected downward after a strong rally, which had been driven by sanctions on Russian oil imposed by Joe Biden just before leaving office. It remains uncertain how the "baby" will drill, given years of low capital expenditure (capex) investment, and whether OPEC will be willing to increase supply to "facilitate" Trump's push for lower oil prices. Complicating matters further is Trump's "Maximum Pain" sanctions on Iranian oil, which could add additional pressure to global oil markets.
Oil tankers$COSCO SHIP ENGY(01138)$ $FRONTLINE PLC(FRO)$ $DHT Holdings Inc(DHT)$ and offshore drilling companies$Valaris Ltd(VAL)$ $Tidewater(TDW)$ are likely the best oil-related energy picks under a Trump administration determined to lower oil prices, regardless of the outcome. If Trump succeeds in reducing global oil prices, demand for tankers will rise as lower prices boost consumption and transportation needs, while offshore drilling benefits from increased activity in viable regions. If he fails, both sectors will still thrive due to persistent global demand and high-margin offshore opportunities. These sectors are also less affected by tariffs, as tankers rely on global trade volumes and offshore operations are often outside U.S. trade disputes. Thus, they are attractive investments in a volatile oil market shaped by Trump's policies.
Conversely, oil refineries might not be the best picks due to their exposure to market dynamics and tariff risks. Lower oil prices could squeeze refinery margins if refined product prices don't decline proportionally, and tariffs on imported steel or equipment could raise costs. Retaliatory tariffs could disrupt export markets for refined products, especially in regions like Asia or Europe, local refineries might face additional pressure if U.S. tariffs disrupt supply chains or intensify competition with U.S. refiners. These risks make refineries less appealing compared to the more resilient tanker and offshore drilling sectors.
Holding Oil Tanker Poisition $COSCO SHIP ENGY(01138)$ - I’m continuing to hold this position, which is currently at the 38.2% Fibonacci level. I’m waiting for it to break resistance to confirm that upward momentum has resumed after a brutal correction, which found support at the 61.8% Fibonacci level in 2024. While I prefer this Chinese state-owned oil tanker company over $FRONTLINE PLC(FRO)$ and $DHT Holdings Inc(DHT)$ , it’s worth noting that COSCO was previously sanctioned for carrying Iranian oil during Trump’s first term. However, they’ve since cleaned up their operations, and I don’t expect the upcoming Iran sanctions to impact them—though, with geopolitics, anything is possible
Holidng Offshore Drilling Positions $Tidewater(TDW)$ $Valaris Ltd(VAL)$ - I’m also continuing to hold these positions. I’ll only consider adding to them if I trim my position in the oil tanker sector. Both stocks are consolidating, and I see potential upside in 2025 as tech rotates into real hard assets.
Big Picture Charts- Oil to Gold ratio testing support; XLE to SPY ratio corrected and I am very eager to see how we close in Feb before making any decisions to increase my total Energy Allocations.
Holding Position Charts:
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