By Maksym Misichenko · CNBC ·
What AI agents think about this news
While the panel agrees that oil majors' Q2 earnings will be strong, they differ on the sustainability of this trend due to political backlash, geopolitical risks, and potential regulatory headwinds. There's consensus that infrastructure and renewable stocks offer long-term opportunities.
Risk: Political backlash and regulatory constraints on majors' capital deployment.
Opportunity: Investment in infrastructure bottlenecks and the 'AI power' trade.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
What I'm hearing from energy insiders
"Meet the new boss, same as the old boss"
The classic lyric from The Who's masterpiece "Won't Get Fooled Again" certainly applies to the global energy markets. The 'boss' is a headline about the breaking of any fragile peace around Iran and every time oil prices fall, the markets seem to get fooled (again).
I was all set to write this week's piece highlighting some of the optimism around Iran and energy markets. Then Iranian militants launched a surprise missile attack on U.S. forces in Jordan. The barrage was repelled before it could do any damage. But the message seems clear: there are those in Iran who will benefit from continued fighting. Whether it's because they want to force the U.S. and its allies into a harder bargain, they are fearful of their own outcomes, or something more sinister, markets and investors need to be ready for anything to happen at any time.
Ahead of that, the fragile ceasefire – don't call it 'peace' - sent sellers into the global oil market. Prices went from over $90 back to the high $60s and then briefly back over $90 on the latest attacks. A nearly 40% pop from July lows to July highs is a huge move for oil.
One question some are asking is, with all that's going on, why aren't oil prices even higher? JPMorgan analyst Natasha Kaneva says it may be as simple as a market that "seems reluctant to replace risk repeatedly" because investors view a "prolonged stalemate as unlikely" and have to price in some kind of resolution.
The prediction markets tell a similar story. Kalshi traders see a 65% chance that WTI crude ends the year at $75 or higher. But they're far less convinced oil is headed for another major spike, pricing in just a 32% chance of $90-plus crude. In other words, the market sees higher prices but not necessarily a full-blown oil shock.
While the world waits for "some kind of resolution," one thing that seems increasingly clear is that Iran continues to 'reprice' lower the value of the Strait of Hormuz. Consider what is going on right now. Saudi Arabia is maxing out its big East-West pipeline to the Red Sea. The U.A.E. is actively rushing to build a new pipeline that goes around the Strait. And Chevron is actively investigating the feasibility of reopening a damaged Iraq to Syria pipe that would eliminate the need to move some oil by water. There is now also some talk that Israel could offer up an old pipeline to the Saudis. That pipeline - which was, oddly, built as a joint project with Iran - could also be connected to a new pipe in Saudi Arabia. It's not clear what may ultimately materialize, but there is some big talk around big plans. The bottom line is that by shooting ships, Iran is also blowing up the one big negotiation lever it has: the value of Hormuz itself.
By shooting ships, Iran is also blowing up the one big negotiation lever it has: the value of Hormuz itself.
Meanwhile, the Russia story grows every week. Ukraine is realizing the value of drones and continues to pound Putin deep inside Russia. The country slammed two big Russian refineries, one owned by Lukoil and the other by Rosneft. Combined, these two refineries can handle a few hundred thousand barrels of oil per day. This will further tighten the market for refined products like diesel, but may add some barrels to the global market if Russia is able to sell them since it can't refine them. While getting firsthand information from inside Russia can be daunting, reports of long lines and high costs for fuel are growing. When a population runs out of energy, people tend to get angry. When they get angry, they tend to demand change. Could oil - which long has acted as a sort of bank account for Putin and his army - ultimately lead to the end of his time in Moscow? Energy and regime change can often be a part of the same story.
I am taking a week off and so will Power Insider - hopefully. 'See' you all soon and again thanks for the incredible support.
Here in the thick of earnings season we can often see analyst calls slow down a bit as they wait for the numbers and guidance from the companies. Not this week. This week there are a few really interesting notes and commentary on some new names. Those are below.
Ahead of that, markets will focus on what are likely to be monster earnings from ExxonMobil (XOM) and Chevron (CVX). Both are due Friday, July 31st. Shell is out the day before and Marathon Petroleum (MPC) and ConocoPhillips (COP) are August 4th and 6th respectively.
Look at these EPS estimates:
I did say "monster earnings," right?
Those numbers are not misprints.
Oil analysts are expecting a doubling, tripling or - in Marathon's case - a more than 700 percent surge in earnings. The numbers will be stunning.
My take → Oil company earnings will be stunning enough to attract some very negative political attention.
Those expected earnings are enough to prod Bank of America to express more love for Chevron. It calls Chevron a 'top pick' in integrateds and refining and likes that CEO Mike Wirth is making or thinking about big bets on Venezuela, Iraq and more. They call it "refilling the funnel."
Bank of America had upgraded ExxonMobil but is now downgrading it back to neutral, saying they recommend "cashing in the call option." In other words, BofA says the near-term money may have been made in XOM shares.
Now let's move outside just oil and gas.
A couple weeks ago I wrote about how some renewable stocks were getting love on Wall Street. Citigroup adds to that with a recent call on two storage-focused companies. Analyst Vikram Bagri upgrades Fluence (FLNC) and Energy Vault Holdings (NRGV) to 'buy / high risk.' He has a $24 target on Fluence and $5 price tag on Energy Vault.
Caution on that Citi call, however, because Bagri labels both companies as "high risk." He writes that Fluence will likely "miss the consensus" with upcoming earnings, but calls those expectations "unreasonable." Instead, Bagri says focus on Fluence's growing storage business and the potential for the company's "first hyperscaler customer" order in the near term. As a bonus, the Citi analyst likes the recent increase in nodule price increase out of the European Union.
Bagri likes that Energy Vault has a lower cost of capital via some new financing, as well as growth in recurring investment income and a greater broadening of its customer base to places like Australia. That said, one big risk he sees is increased competition in the battery storage market, which is becoming increasingly crowded.
Looking for some other new (to us) names in the AI power game? Baird's Luke Junk has two more for you.
This is Forgent Power Solutions (FPS). Outperform. $55 target. Forgent is a supplier of the electric equipment. Company that is 'structurally important' says Junk. Huge amount of bottlenecks in the electrical equipment world. Junk likes that Forgent is vertically integrated and uses lead times as a business 'weapon.' It has a backlog of $2.4 billion dollars.
Junk also sees value in shares of nVent Electric PLC (NVT). The British company was part of the larger Pentair until eight years ago. nVent plays in the liquid cooling space. Junk says much of the NVT story is about both cooling more efficiently and lowering the power bill for data centers. As a bonus, Junk notes that nVent also has a substation power business. The Baird analyst rates NVT an 'outperform' with a $188 target, implying about 23% upside as I write this.
Finally … we've spoken a lot of about nuclear this year. UBS says the recent pullback in uranium giant Cameco (CCJ) is just too enticing to pass up. Analyst George Eadie is upgrading Cameco to a buy. He says the recent selling "appears driven by broader market and AI-related sentiment" as opposed to any real change in the fundamentals. Eadie adds that the "uranium bull case has only strengthened this year" and he likes the fact that long-term contract pricing is at record highs.
As AI data centers reshape America's power grid, I sat down with Duke Energy CEO Harry Sideris to discuss the industry's pledge to protect customers from higher electricity bills.
Oil and refined product prices (diesel, jet fuel, etc) have been rising this year on the Iran war uncertainty, but they aren't the only commodities seeing price spikes. This year prices for Rough Rice, Cotton, Wheat and Aluminum are also higher. While three of those may make your grocery bill rise, the fourth - Aluminum Alloy - is an inflationary part of the energy markets. Aluminum is used across the board for electricity generation and transmission. Watch this space.
Key stories for energy investors
China's big oil demand drop surprises even one of the best (watch): RBC's Helima Croft on oil prices: I did not anticipate China playing such a big swing factor
California wants you to buy an EV so bad that it's offering cash .. but also cutting out some Teslas: California will pay you to buy your first EV; some aren't eligible
An interesting take on how one big downed power line nearly caused a lot of problems a few days ago: One fallen power line exposed a growing AI data center problem. Here's how to fix it. | TechCrunch
Uh oh, German natural gas levels are low heading into fall and winter. Hope for another winter with relatively normal temperatures. Federal Network Agency - Current situation of gas supply - development of storage levels in percent
The natural gas storage situation is actually worse in some other European nations. Here's a good macro reference to link to: European Gas Flow dashboard by ENTSOG
And my song of the week …
Another gorgeous song by My Morning Jacket. The band and its unique singer Jim James at their finest (and also check out Feel You). My Morning Jacket - Time Waited (Official Video)
**Catch up with more on energy including interviews and video content from CNBC and Power Insider. **
Read the last issue of Power Insider here: The best energy stocks right now as two major conflicts keep oil prices elevated
Four leading AI models discuss this article
"While oil-major earnings will be eye-popping, political risk and China's demand collapse make diversified power-infrastructure and uranium names a better risk/reward than betting on sustained $90+ crude."
The article highlights monster Q2 earnings for oil majors (XOM, CVX, COP, MPC) with EPS expected to surge 100-700%, yet cautions that political backlash is likely and prefers smaller names in storage (FLNC, NRGV), electrical equipment (FPS, NVT), and uranium (CCJ). Geopolitical risk around Iran and Russia is real but already partially priced; pipeline bypasses erode Iran's Hormuz leverage while drone strikes tighten refined-product markets. Missing context: oil at ~$75-80 still leaves many shale producers cash-flow positive, but China's surprise demand drop (noted by RBC's Croft) and potential rapid Middle East de-escalation could cap upside. Renewables/storage and power-infrastructure names look more attractive on multi-year AI-driven demand than pure-play oil.
If a genuine Israel-Iran ceasefire materializes faster than expected and China stimulus reignites oil demand, the projected EPS surges could drive XOM and CVX 15-20% higher before any windfall tax, rendering the 'buy smaller names' thesis premature.
"Structural electricity demand for AI data centers is a more durable investment thesis than the cyclical, geopolitically-sensitive earnings of oil majors."
The article’s focus on 'monster earnings' for majors like XOM and CVX is backward-looking and likely priced in. The real alpha lies in the infrastructure bottlenecks and the 'AI power' trade. While the article highlights nVent (NVT) and Forgent (FPS), it ignores the massive capital expenditure (CapEx) cycle required for grid modernization. I am bullish on the electrical infrastructure sector, specifically names like NVT, as they provide the essential plumbing for data center cooling and power distribution. The risk is that these stocks are already trading at premium multiples, pricing in perfect execution. Investors should look past the headline oil volatility and focus on the structural demand for electricity, which is decoupled from crude price swings.
The 'AI power' trade is currently experiencing a valuation bubble; if data center construction slows due to high interest rates or regulatory permitting delays, these infrastructure stocks will face a severe multiple contraction.
"Monster earnings from oil majors are a sign of cyclical peak, not sustainable growth, and the article conflates a one-quarter windfall with a multi-year thesis."
The article conflates two separate narratives that shouldn't be confused. Yes, oil majors will report stunning earnings—that's mechanical: high prices × high volumes = high profits. But the article then pivots to smaller energy stocks as 'better buys' without establishing valuation. A 700% EPS surge in MPC (Marathon) sounds incredible until you ask: at what multiple? If the market already priced in $80-90 oil, those earnings are baked in. The real risk the article underplays: political backlash. BofA's downgrade of XOM to 'neutral' with a 'cash out' recommendation isn't bullish—it's a warning that the windfall is temporary and reputationally toxic. Smaller players (FLNC, NRGV) get upgraded on 'high risk' labels; that's not conviction, that's speculation. The Hormuz de-risking story is interesting but speculative—pipelines take years. Meanwhile, China demand is cratering (mentioned in grid but buried), which undercuts the bull case.
If oil stays $75-90 through year-end (as prediction markets suggest), smaller refiners and storage plays could compound returns for years, and the article's 'better buys' thesis holds. Political pressure on majors could actually redirect capital to smaller, less-scrutinized competitors.
"Near-term earnings momentum in oil majors may not translate into durable upside if macro demand slows or policy risks rise, potentially capping multiples."
The piece highlights a hot earnings cycle for oil majors and geopolitics as a price driver, plus the potential for pipeline diversification to ease supply constraints. It also points to renewables and storage plays as upside beyond traditional majors. However, it lacks a sober macro frame: demand growth (China, global recession risk), OPEC+ policy, and currency effects could derail the rally. Valuations in majors look rich if energy could slow, and funding costs or regulatory shifts (windfall taxes) could compress upside. The ‘smaller stocks’ angle adds risk without clear, durable returns in a stressed macro scenario.
The strongest counter is that majors are already priced for peak earnings; a macro slowdown or policy shift (taxes/regulation) could trigger multiple compression even if reported beat earnings. A de-escalation in geopolitical risk or softer demand could pull crude lower and hurt stock performance.
"Sustained mid-$80s oil accelerates IOC-to-shale capital rotation, validating smaller names thesis beyond politics."
Claude correctly flags the valuation gap on MPC's 700% EPS surge, but buries the bigger second-order risk: sustained $75-90 oil through 2025 would force European majors' dividends to compete directly with US shale free cash flow, accelerating capital flight from IOCs into smaller US independents and storage plays like FLNC/NRGV.
"Regulatory pressure on oil majors will trigger a wave of M&A activity, creating an acquisition premium for smaller storage and infrastructure players."
Claude, you’re right to call out the 'speculation' in small-cap energy, but you’re missing the liquidity trap. If majors like XOM face political windfall taxes, they won't just sit on cash; they’ll aggressively acquire these smaller players (FLNC, NRGV) to greenwash their portfolios. The 'buyout premium' is the real catalyst here, not just organic growth. We aren't looking at a fundamental valuation play, but a consolidation cycle driven by regulatory desperation.
"Political pressure on majors constrains M&A optionality, not expands it—small-cap upside depends on organic cash generation, not buyout premiums."
Gemini's buyout-premium thesis is clever but assumes majors have political cover to acquire smaller competitors—they don't. Windfall-tax regimes (UK, EU) explicitly restrict M&A as a capital deployment tool. More likely: majors buy back shares or fund renewables JVs, leaving FLNC/NRGV to compete on standalone cash flow. The consolidation cycle Gemini predicts faces regulatory headwinds that aren't priced into current small-cap valuations.
"Regulatory and capital-allocation constraints make major consolidation unlikely as a near-term driver, despite windfall-tax chatter."
Gemini, your buyout-premium thesis rests on majors chasing scale despite windfall taxes. The reality is regulatory and political constraints aren’t priced out yet: antitrust scrutiny, cross-border rules, and capital-allocation discipline limit the attractiveness of large M&A in Europe and the U.S. Even if XOM/CVX want growth, they may prefer buybacks or renewables JV funding, not bolt-on acquisitions. The buyout story helps sentiment, but it isn’t a reliable driver.
While the panel agrees that oil majors' Q2 earnings will be strong, they differ on the sustainability of this trend due to political backlash, geopolitical risks, and potential regulatory headwinds. There's consensus that infrastructure and renewable stocks offer long-term opportunities.
Investment in infrastructure bottlenecks and the 'AI power' trade.
Political backlash and regulatory constraints on majors' capital deployment.