Closing Bell: What’s Good for World Peace Is Bad for Energy Stocks

With reports of potential détente in the U.S.-Iran war, and potential relief for stalled tankers in the Strait of Hormuz, crude oil prices fell Wednesday and so will margins for refiners, explorers, and producers.

The international Brent oil-price benchmark sank 8% Wednesday to $101.31 per barrel, while U.S. West Texas Intermediate oil was down more than 7% to $95.05 per barrel. Lower fuel prices may take time to impact the pump and company financials, but the stocks react first. Among U.S.-based refiners, Valero Energy (VLO) was the biggest loser with a decline of 7%; Marathon Petroleum (MPC) and Phillips 66 (PSX) were off roughly 5% apiece.

Big beneficiaries of richly priced crude also include the majors with integrated exploration, production and refining assets. Also trading lower: ExxonMobil (XOM), Chevron (CVX), Shell (SHEL), ConocoPhillips (COP), and European major BP (BP).

If you quickly search for the public company 1Q oil price profits, Google with Copilot points to a Guardian article with some startling multi-billion “war windfall” calculations for state-owned and public firms alike. But here are three thoughts that may be the bigger takeaways for investors and traders:

1.     Only yesterday, Secretary of State Marco Rubio didn’t indicate a long-term solution with Iran is in the offing. According to a Tuesday post-press conference back and forth with the media, Rubio said, “The President would prefer to sit down, work out a memorandum of understanding for future negotiations that touches on all the key topics that have to be addressed, a full opening of the Straits so the world can get back to normal. And he preferred that to be negotiated … That is so far not the route that Iran has chosen.”

2.     The Guardian notes that “the oil and gas sector has made an average of $1 trillion a year in pure profit every year for the last half century.”

3.     In an interview with Diane King Hall today, Gary Shields of Nassau Street Partners says inflation is always sticky and that consumer spending is not driving the economy, but rather AI capital spending.

Bookmark our Schwab Network energy coverage to keep up with relevant interviews.

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