Hello my fellow situation-monitoring enthusiasts,
Throughout 2025, I went balls deep on oil and gas, both producers and oilfield services. I started buying in Q1 and despite a minor implosion following liberation day, I kept accumulating, eventually I ended up being all-in but as the share prices continued to fall, I bought more using margin, bringing my account at the start of 2026, to 130% long O&G.
My original thesis was pretty simple, it basically boiled down to two things: Firstly, due to an unsustainable lack of investment in new drilling, production in the Permian was about to roll over, this would eventually lead to a rebound in crude prices as supply dried up. Secondly, if new investment in drilling did happen, oilfield services stocks, due to their extremely depressed prices, would rebound hard. In either scenario, a mixed portfolio of producers and oilfield services would do well, that was good enough for me, so obviously the only right thing to do, was go all-in, leveraged if needed.
Any reasons one might have had, for investing in oil and gas, in 2025, immediately went out the window early this year, as the military buildup that had been accruing in and around the Caribbean, got put to use by the Trump administration, in their first campaign of "international diplomacy" in Venezuela, this excursion led to a sharp rally in my oilfield services names but the producers stayed mostly flat, I took this as my sign to unload the majority of these and reallocate the proceeds into... well obviously, more oil producers. Following their success in Venezuela, the Trump administration very quickly pivoted to their focus to the next target of "liberation" the Islamic Republic of Iran. The playbook was the same as Venezuela, offering diplomacy with one hand while building a heavy military presence with the other.
We all know what happened next.
While the US (and Israel), striking Iran, wasn't surprising, given the historic military buildup in the region, Iran's method of retaliation has proven highly unorthodox, using asymmetric warfare to inflict economic pain on the US via spiking energy, fertilizer and petrochemical costs, via the successful closure of the Strait of Hormuz, something only previously theorized possible.
Despite being widely expected to be short-lived, the conflict and the accompanying closure of the SoH, has now dragged on for a month and so far, seems to be without any clear end in sight. So far the energy markets have stayed mostly calm, due to a drawdown in global reserves, these however are expected to hit critically levels of depletion, within the next two weeks, unless the flows out from the Persian gulf, normalize very soon.
The question is now, exactly how long will this conflict drag on for and more importantly, how long, until transit through the SoH normalizes. So far, longer term (Brent) crude futures (one year out), have stayed mostly calm, "only" increasing from \~$60/barrel, to \~$80/barrel, far short of the current spot price of $105/barrel, leaving the futures curve in strong backwardation, a clear signal, oil traders are still betting on a short term resolution of the conflict. Equities of oil producers, although elevated, are still relatively muted compared to what might have been theorized, given the scenario, leaving traders with a choice:
A: Lock in prices at current levels, accepting the consensus view of a near term resolution and a normalization of oil prices in the range of \~$80/barrel.
or
B: Hold out for further escalation via boots on the ground and/or the seizure of Kharg Island, leading to a longer, drawn out conflict and oil prices spiking to +$150/barrel, settling at +$100/barrel.
What are you, my fellow war-dogs, doing to maximize the value from this conflict, while staying nimble enough, not to get trapped, if/when, Trump inevitably TACOs.
My portfolio is currently up just shy of 90% YTD
See full portfolio breakdown below:
Name - Ticker - Open P/L (loss)
Valaris - VAL - 134.76%
Kosmos Energy - KOS - 122.65%
Noble - NE - 96.64%
Seadrill - SDRL - 85.80%
SM Energy - SM - 82.18%
Chord Energy - CHRD - 70.74%
Crescent Energy - CRGY - 68.93%
Matador - MTDR - 63.79%
GeoPark Ltd - GPRK - 61.41%
Scorpio Tankers - STNG - 56.81%
Murphy Oil - MUR - 37.87%
FTAI Infra LLC - FIP - 14.96%
SunCoke Energy - SXC - 2.63%
New Fortress Energy- NFE - (75.60%)