Hillcrest Energy Technologies. (CSE: HEAT)
From concept to commercialization, Hillcrest is investing in the development of energy solutions that will power a more sustainable and electrified future.
In recent times, the energy sector has seen a flurry of merger and acquisition activities, with major US oil and gas industry giants engaging in large-scale ‘shopping sprees.’ In 2023, the total value of mergers and acquisitions in the US oil and gas industry reached an impressive $250 billion. This trend has continued into this year, driven by producers’ optimistic outlook on future oil and gas demand, leading to a need for consolidation and increased production.
Just yesterday, ConocoPhillips (NYSE:COP) announced an all-stock acquisition of Marathon Oil Corp (NYSE:MRO) totaling $22.5 billion. It is worth noting that Marathon holds significant assets within the United States, suggesting ConocoPhillips may be betting on a Trump victory in the upcoming presidential election and subsequent support for domestic energy expansion.
Recent years have seen oil giants flush with cash, eager to invest in high-quality assets. On May 3, Exxon Mobil (NYSE:XOM) completed its $59.5 billion acquisition of Pioneer Natural Resources, making Exxon the largest oil and gas company in Texas’s Permian Basin. On Tuesday, shareholders of Hess Corp (NYSE:HES) voted in favor of Chevron’s (NYSE:CVX) $53 billion acquisition offer. If the acquisition goes through, Chevron will gain access to oil fields in Guyana.
It’s clear that the appetite for asset acquisitions among energy companies is strong. However, amidst the buzz of M&A news, investors should not overlook another important investment opportunity this summer: rising oil prices.
You might ask, why are oil prices on the rise?
Two major factors will drive oil prices up in the coming months:
First and foremost is the summer travel season. According to The Vacationer’s ‘2024 Summer Travel Survey,’ over 80% of Americans, or more than 212 million people, plan to travel this summer, which will undoubtedly boost oil demand.
The Organization of the Petroleum Exporting Countries (OPEC) shares this view. OPEC predicts that summer travel demand will boost crude oil demand in the second and third quarters of 2024. Specifically, OPEC expects jet fuel/kerosene demand to increase by 600,000 barrels per day, and gasoline and diesel demand to increase by 400,000 barrels and 200,000 barrels per day, respectively. Overall, OPEC projects oil demand to reach 2.25 million barrels per day this year.
The second factor is the Russia-Ukraine war, which presents higher uncertainty but could become a more significant short-term driver of oil prices. The ongoing conflict has evolved into a war of attrition, with recent months seeing Ukraine repeatedly attack Russian refining facilities and railways, and there is a growing likelihood of sabotage of Russia’s Arctic oil pipelines.
On the other hand, Russia has launched a new round of attacks on Kharkiv, Ukraine’s second-largest city. If the city falls, Ukraine might retaliate by attacking the Arctic pipeline, or Western countries may impose an embargo on Russian oil. Either scenario could drive oil prices to $100.
