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

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 their competitors at JPMorgan, the Goldman squad also lists three reasons for their rationale:

• Lower flows from the Persian Gulf and the Red Sea.
• Lower Russian oil exports.
• Stronger Asian imports, including to China.

So what does OPEC say?

The group is out with its widely-read monthly oil report. While OPEC hasn’t been on the front page much lately given the chaos around Iran and oil flows, investors still closely scour its Monthly Oil Market Report. The report notes that OPEC revised oil demand slightly lower from last month’s total but believes that demand growth should return next year.

The International Energy Agency has a similar view, saying that world oil demand should “decline by 1.6 mb/d in 2026,” or about 510,000 barrels per day more than its estimate last month. The IEA adds that the “ongoing closure of the Strait of Hormuz and elevated fuel prices continue to weigh on oil consumption” but, importantly, adds that crude oil demand growth should recover in the fourth quarter this year and pop by 2.4 million barrels per day in 2027.

Both are optimistic, but as bullish as that seems, it also seems important to remind  you to remember that any future estimates are subject to the return of some sort of normalcy around Iran, Hormuz, the Red Sea and Russia. That’s far from a sure thing at this point!

Analyst Nicholas Amicucci likes NRG Energy (NRG). While his new $195 price target on the stock is below his recent $215 target, it still suggests just under 60% upside. Amicucci also likes Bloom Energy (BE). He has a $350 target on the storage company stock, or about 45% upside. He recently joined us on Power Lunch to talk about both.

Power Insider is not just about oil and gas. It’s about all energy. A few weeks ago we highlighted some Wall Street love for First Solar. Baird is also on board. The firm upgraded First Solar (FSLR) to outperform and raised its target to $318. Analyst Ben Kello says that “after nearly six months on the sidelines” he is upgrading FSLR for  several key reasons including:

• Upcoming benefits from a strong utility-scale market at both fundamental and stock level
• Section 232 removes an overhang for bookings to resume (and at higher ASPs)
• Numbers have been more appropriately calibrated
• Potential for FSLR to articulate its capital allocation priorities.”

Note →  Section 232 is the tariffs on some solar materials.  It’s complicated and you can read more here and here.

This week’s interview with Tyler Page, CEO of Cipher Digital (CIFR), one of the companies that recently made the big pivot from crypto-to-AI power and infrastructure.