The latest Market Talks covering Energy and Utilities. Published exclusively on Dow Jones Newswires at 4:20 ET, 12:20 ET and 16:50 ET.
The disconnect between oil market fundamentals and prices is reducing oil's appeal as an investment asset class, says David Russell, global head of market strategy at TradeStation. The closure of the Strait of Hormuz came when the market was oversupplied, "so in some ways you had one of the most bearish and one of the most bullish things happening at the same time," he says. Before oil was understood as one market, now traders have to consider the different moving parts, such as where tankers are going, which refineries are offline. "These are conversations we never had even a year ago." Unexpected and aggressive government interventions destroy the speculative desire to go long oil or even short oil, Russell adds. "And why get speculative bullish about oil when you can get speculative bullish about AI stuff?" (anthony.harrup@wsj.com)
0944 ET - Oil futures are hovering around yesterday's levels as the market sees little movement toward settling the dispute over control of the Strait of Hormuz. News that more oil is making it through the strait, while still only a fraction of normal, is keeping oil in choppy trade, Dennis Kissler of BOK Financial says in a note. The estimates of higher crude flows and the EIA's report of a 17.4 million barrel weekly build in U.S. crude stocks "is keeping the long side of the trade nervous," he says. Tight global diesel supply remains the most bullish aspect of the market, he adds. "Even though more crude oil has moved, refined products not so much." WTI is up 0.1% at $81.31 a barrel and Brent is off 0.2% at $86.91. (anthony.harrup@wsj.com)
0817 ET - E.ON's shares fall after the German regulator publishes the draft determination for gas distribution. The proposals are weaker than expected but the drop in share price offers a buying opportunity, J.P. Morgan analysts write. They retain their overweight rating on the stock. Under the proposals, the headline pretax return on equity of 5.76% is significantly below the markets expectation of above 7%. However, many of the proposals aren't applicable to the power sector and once adjustments are made, the number are more equitable, they write. E.ON's shares fall 4.1% at 17.15 euros. (adam.whittaker@wsj.com)
2247 ET - Korea Electric Power's 2026 earnings are likely to come under pressure from marginal electricity-tariff increases and higher energy prices, say Nomura's Cindy Park and Dongmin Lee. Elevated fuel and electricity purchase costs are weighing on the South Korean state utility's margins, the analysts write in a note. Nomura slashes its 2026 net-profit estimate for the company by 48% to 4.871 trillion won. It expects the firm's return on equity to be 9.7% this year, down from its earlier estimate of 17.9%. Nomura cuts its rating on the stock to neutral from buy and lowers its target price to 40,000 won from 61,000 won. Shares are 0.3% lower at 33,000 won. (kwanwoo.jun@wsj.com)
2216 ET - China Aviation Oil (Singapore)'s 17% fall in 1H net profit disappoints DBS Group Research and prompts it to review its earnings estimates. The jet fuel trading company's core trading segment suffered from weaker margins as gross profit per ton from middle distillates plunged, says analyst Jason Sum in a note. While jet fuel trading conditions should improve from the 1H trough, he expects trading margins to remain pressured due to volatile energy prices. He anticipates cutting his earnings estimates after meeting China Aviation's management on Tuesday, and is reviewing the stock's buy rating and target price of 2.50 Singapore dollars. Shares are down 2.5% at S$1.54. (megan.cheah@wsj.com)
1928 ET [Dow Jones]--Swedish private-equity firm EQT's bid for Cleanaway Waste Management looks opportunistic to Jefferies. Cleanaway has disappointed market expectations over the past five years despite owning assets that are difficult for rivals to replicate. "EQT's approach is therefore understandable, given the option to make changes to the business and deliver stronger cash flow growth in the medium term," says analyst Amit Kanwatia. EQT is offering A$3.13/share. That values Cleanaway's equity at A$7.0 billion. Cleanaway missed market expectations with Ebit guidance of A$500 million-A$530 million in FY27. "Therefore this bid does insulate shareholders from another disappointing result, while supporting the board's intention to recommend," Jefferies adds. (david.winning@wsj.com; @dwinningWSJ)
Origin Energy's flat annual dividend surprised its bull at UBS. That's partly because Origin's leverage is well below the bottom end of a 2-3x target range and FY27 capex guidance is lower than expected. "Given these outcomes and a conservative approach to dividends, we think it introduces the potential for Origin to pursue scale growth over FY27," analyst Tom Allen says. Potential deals include small energy and broadband retailers, which will help reduce customer churn and boost value, UBS says. Origin could also offer full scale energy and infrastructure solutions to data centers and hyperscalers. It could plow more investment into Octopus Energy and Kraken. Origin ended Thursday at A$11.86.
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