© Maksym Yemelyanov/Adobe Stock
– Oil
Since the announcement of Donald Trump’s victory, the price of a barrel of oil (down 4% to $73 per barrel) has evolved further in response to macroeconomic data emanating from China (slowdown in industrial production), director of the International Energy Agency, Fatih Birol, at the COP 29 summit reporting a “weakening” of global oil demand and doubts – once again – about the intensity future rate cuts in the United States (resurgence of inflationary fears emanating from the electoral program of the new American president).
Conversely, oil production, exploration and services companies (such as Vallourec, Editor’s note) welcomed Trump’s victory, appreciating by almost 6% in less than two weeks (S&P Oil and Gas index Exploration and Production, VanEck Oil services). Investors were responding to Donald Trump’s campaign promises to lower prices by all means, including the price of gasoline by promoting growth in American oil production. On Saturday, he nominated Chris Wright, (CEO of Nasdaq-listed Liberty Energy), an ardent supporter of hydraulic fracturing of oil and natural gas, to serve as secretary of energy.
Gold, oil… Commodities could become one of the most profitable investments
US oil production jumped during Trump’s first term
Under Donald Trump’s first term, American oil production increased by 44%, to 13 million barrels per day, without negatively impacting the price of a barrel which initially appreciated by 30% ( 2016-2018). And this double increase in oil production and its underlying did not have a major impact on the stock market performance of players in the sector, as we would be tempted to believe, quite the contrary: between the end of 2016 and the end of 2018 , the index of oil service companies fell by more than 50%, and oil companies (production) by more than 30%. Over the same period, the number of active drilling rigs increased by 60%.
>> Readers of Momentum, Capital’s premium investment letter based on technical and financial analysis, have been able to make significant gains recently on Vallourec shares, within the oil sector. And they were also able to realize significant capital gains on shares in the sector (bought then resold at good timing) a few months ago. If you opt for the annual subscription, 5 months are free.
Oil companies sought to achieve productivity gains
Correlating the evolution of the price of a barrel of oil to American national production, as Donald Trump did, is, as we have just seen, reductive. And summarizing the evolution on the stock market of oil stocks by oil production remains just as uncertain. The fundamentals of these sectors (production, exploration, distribution, services) matter much more. In recent years, oil companies have prioritized streamlining the returns their investors have come to expect.
This has led them to reduce their exploration and production expenses even during cycle peaks and to encourage the buyback of their shares and external growth (through acquisitions). This strategy of seeking productivity gains continued in 2024, as evidenced by the number of active drilling rigs estimated at 478 (Baker Hughes Rotary Rig Count), at its lowest level since the low of 2020, while American production of oil at 13.4 million barrels days, tests its highest historical levels.
Trump’s victory: what impact on your investments?
Donald Trump wants to increase US oil production and players in the sector will benefit from a more buoyant environment
Donald Trump’s goal of increasing American oil production – by making hydraulic fracturing more accessible through drilling permits and expanding zones – will not impact demand, nor supply for that matter. , which will depend on more global factors, but it will allow players in the sector to benefit from a more favorable investment environment.
