Oil Price to Trump: Frack You! | Australian Markets

Here’s three issues I’m desirous about right this moment…

1. Imagine signing off on an anticipated expense of almost $12 billion.

That’s sure more than a long lunch with a cheeky dessert. But that’s what management at Woodside Energy (WDS) simply did.

It’s a massive transfer – and a massive assertion.

What’s the story?

Woodside goes to construct a large US LNG export facility within the Southern state of Louisiana. You know…the one on the “Gulf of America”.

The project is due to be in manufacturing in 2029.

Woodside CEO Meg O’Neill says:

“The project benefits from access to abundant low-cost gas resources in the United States and boasts an asset lifespan of more than 40 years. It also has access to well-established interstate and intrastate gas supply networks.”

We may also add WDS is shifting within the slipstream of Trump’s presidency.

He needs the world to buy more American merchandise. US natural gasoline suits the invoice for a lot of international locations, like Japan, South Korea and even Europe. There’s no doubt about it.

The US is blessed with astonishing power sources.

The difficult half for Woodside – or any producer on this state of affairs – is that they’re dancing with so many variables.

Nobody is aware of what US and/or world gasoline costs will likely be in 2029 and the 7 years after.

That’s Woodside’s project timeline to get its money back earlier than the project turns into profitable for shareholders

That mentioned, this latest transfer is completely in accord with what my colleague Jim Rickard’s is speaking about in his latest presentation. Make sure you tune in to see the modifications Trump is driving via the American financial system like this.

We may also ask…

2. How is the US gasoline price wanting proper now?

It’s bouncing after the tariff induced promote down in early April, like copper, which you’ll see right here…

US natural gasoline price

One factor to notice right here is that the fracking growth from 2014 onwards despatched the US natural gasoline price VERY low via the final decade, underneath US$2.

It was an extraordinary boon for US industry and client. The gasoline was a facet product, principally, for the oil frackers. But they did a lot drilling the gasoline simply saved coming.

Trump would possibly like to wank on about how good he’s for the US financial system, however he had two large tailwinds at his back during his first Presidency: low-cost power and the Wall Street tech growth. He had nothing to do with both. His timing was impeccable – I’ll give him that.

That brings us to right this moment…

Here’s a little glitch within the Trump gameplan to flip US power into a additional export powerhouse.

Trump is exporting it AWAY from American customers, probably in the identical, arguably dumb, approach we do right here in Australia.

Instead of utilizing our natural aggressive benefit in gasoline to feed Australian industry, we promote to Asia as an alternative. That brings in export {dollars} and income. But it drives up home costs.

This is another excuse Trump’s want to “win” the trade battle will not be so clear cut.

US natural gasoline exports would possibly go up, however so do American home prices, particularly if the US natural gasoline price retains drifting increased.

That brings the US oil price into play. Trump says he needs to “drill, baby, drill”. But US oil companies do need an incentive to spend the large {dollars} to make it occur.

US oil at US$60 per barrel will not be a significantly juicy price.

If the present financial uncertainty and Trump’s tariffs drive a international slowdown, there’s no motive to assume oil costs are going increased anytime quickly, absent some explosive transfer out of the Middle East. It would possibly even crumble underneath US$50.

That’s a win for shoppers. But the frackers are gonna give a ‘frack you’ to Trump at that price. No “drill, baby, drill” in that state of affairs.

Trump’s two acknowledged objectives: low “gas” (petrol) costs and a booming oil industry don’t sq. up. You get one or the opposite.

Plus…

3. Then there’s that factor known as AI.

Lost momentarily within the tariff swirl is the unrelenting demand for energy from the growth of artificial intelligence.

This is the place the Woodside transfer would possibly prove to be a turkey.

If more industry goes to the USA to appease Trump, and AI’s exponential growth continues, it might drive US natural gasoline costs a lot increased. This would weaken the American client and different, unrelated industries.

The gameplan right here for power producers can be to promote INTO the American market. Woodside is doing the other. It’s presuming US natural gasoline costs keep low-cost and the world market increased.

Hmm. Your guess is pretty much as good as mine as to how this all performs out. But power is a massive space to watch because the world retains turning.

Regards,

Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator

There are indicators of life in uranium stocks, with the Betashares Global Uranium ETF [ASX:URNM], confirming a weekly buy pivot from a main buy zone final week.

Trump has mentioned he’ll exempt yellow cake from tariffs, which can have sparked some shopping for, however the uranium spot price has been slowly turning up not too long ago after a 12 months of regular promoting strain.

The blackout in Spain might additionally see a return of curiosity within the uranium sector as people query the soundness of a grid that depends on renewables.

Many uranium stocks have a high stage of short curiosity which can be beginning to cowl and a few of the smaller uranium stocks are leaping sharply from oversold ranges.

Regards,

Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps

All advice is normal advice and has not taken into consideration your personal circumstances.

Please search unbiased financial advice concerning your own state of affairs, or if unsure concerning the suitability of an investment.