Watch: Barron’s Senior Energy Writer Laura Sanicola and OPIS Chief Oil Analyst Denton Cinquegrana discuss what’s ahead for oil this week.

Transcript:

LAURA SANICOLA: Hi, everyone. This is Laura Sanicola, the author of Barron’s Energy Insider newsletter, and I’m here again today with my colleague, Denton Cinquegrana, chief oil analyst at OPIS.

So, Denton, the big story this week is obviously the impact of Donald Trump’s reelection on energy. We’ve written about it in the last few of our newsletters, but hoping you could break down for us the knee jerk reaction of oil prices to his election and whether it’s sustainable in the long run.

DENTON CINQUEGRANA: Yeah. So watching election coverage, I chose to watch the financial news networks instead of your kind of just standard news networks. And oil prices were really dropping as the states were coming in, etcetera, etcetera. And I think that knee jerk reaction, even though prices have recovered a lot of those losses, that first instinct is gonna ultimately be correct.

Now we all know that oil production, natural gas production, are at record levels in the United States. We’ve never produced more than we have already. So the whole “drill baby drill” argument probably doesn’t work right now. But what I think Trump can do is maybe not incentivize producers to maybe invest in future production by using a smoother, streamlined permitting process or tax incentives, things like that.

So, again, the fact of another reason, there’s probably going to end up being more oil on the market, whether that’s coming from the United States down the road or he tightens the screws on Iran and Venezuela and their sanctions, and that releases some more oil from OPEC. So net net, I think there’s gonna end up being more oil on the market starting in 2025, when when president Trump takes office.

SANICOLA: I wanna talk about US independent refiners. One company we highlight in the newsletter this week is Valero, which is the lowest cost or lowest operator cost refiner, in the US. And, this company might benefit if Trump, for example, rolls back the EPA’s aggressive pollution standards and fuel efficiency standards for vehicles, which would, in theory, lower gasoline use and emissions in the long run, and Trump is widely expected to tackle one or both of those issues. How does that change the outlook for refiners, or does it not really?

CINQUEGRANA: Yeah. I think maybe short-term, it doesn’t much. But in the longer term, I think it becomes a little bit more bullish for for refiners. As you know and and mentioned, Valero is best in class when it comes to operating costs. They’re they’re really good at keeping their costs down. You know, obviously, the Gulf Coast has abundant cheap natural gas, which you use to run your refineries. But any reduction in CAFE standards will obviously help. I don’t know if you actually reduce them as much as you could potentially freeze them. But, also, once we get past, say 2025, 2026, the amount of refining capacity additions globally, really kind of falls off a cliff here, and that leaves the Gulf Coast refiner, Valero, say, for example, in a really good position because the United States exports a lot of fuel around the world, obviously, to South and and Latin America primarily. But we do export, gasoline, diesel, jet fuel, you know, throughout the world. So net at the end of the day, that’s probably gonna be a benefit for them.

SANICOLA: Lastly, I wanted to bring up some potential changes to, Donald Trump’s cabinet that could affect oil companies, specifically retailers. And I’m thinking specifically of the likely departure of the current FTC chair, Lina Khan, who’s very well known for shaping Biden’s highly concerted antitrust policies with the goal of, protecting consumers from the impacts of too much consolidation of big companies. What’s Trump’s stance on this, and how likely is it to affect consolidation in the energy space?

CINQUEGRANA: Well, we’ve already seen a lot of M&A in the retail segment, but the big one that’s kind of hanging out there is Circle K, owned by Couche Tard, the Canadian company, and 7-11, owned by Seven and I Holdings, based in Japan. That’s the move that would be just earth-shattering as far as, you know, M&A in the retail space is concerned. I think a Trump administration may be a bit more friendly to something like that taking place compared to the current M&A environment.

SANICOLA: Great. Well, thanks so much, Denton, and we’ll see everybody next week.

CINQUEGRANA: Thanks, Laura.