Name: Oil heading for largest annual decline since 2020
Uploaded: 2025-12-26T16:52:39.509Z
Duration: 4 min
Description: John Kilduff, founding partner at Again Capital, and Rob Thummel, senior portfolio manager at Tortoise Capital, join ‘Squawk on the Street’ to discuss the impact of geopolitical tensions on oil prices, whether U.S. producers will keep pumping oil, and more.

John Kilduff, founding partner at Again Capital, and Rob Thummel, senior portfolio manager at Tortoise Capital, join ‘Squawk on the Street’ to discuss the impact of geopolitical tensions on oil prices, whether U.S. producers will keep pumping oil, and more.

Oil prices are poised for their largest annual decline since 2020, driven by a persistent global supply surplus. Despite geopolitical events and production disruptions in countries like Venezuela and Nigeria, the market has not seen a significant price increase, as major producers such as Saudi Arabia and OPEC+ have not implemented substantial supply cuts.

Industry experts note that oil and gas companies have maintained strong capital discipline, allowing many to continue offering attractive dividends even as prices fall. Technological advancements, including the use of AI and improved extraction methods, have reduced production costs and increased output, particularly in the U.S., supporting the resilience of energy sector stocks.

Oil heading for largest annual decline since 2020

Let's bring in again Capital Founding Partner John Kilduff and Tortoise Senior Portfolio Manager Rob Thummel. John, does it tell you the story about how much inventory is out there in the world or at least perceived to be out there in the world that we're boarding Venezuelan, some Venezuelan tankers that were starting to attack militant targets in Nigeria and yet the price of oil is down right now? Yes, and good to see you, Brian. The cushion, the supply cushion out there right now is extant and it's hard to make a dent in it. And the players you're talking about, Venezuela hasn't been a meaningful producer of crude oil for some time now. Every little bit counts because we're priced for perfection to the downside currently. So if we were to lose a slug of oil from say Venezuela, Nigeria, I know you've been talking about this morning, and even some more pressure on Russia, that that would add up and get us maybe potentially back on the upside. But save for any real concerns, any real loss of volumes, the trajectory is just lower for now until we get a meaningful supply response from the major oil producers, Saudi Arabia, OPEC plus, because the surplus as we go into 2026 here is going to be potentially remarkable. I'm not sure it's going to come to pass, but the numbers that are out there that are in the market that are being priced into the barrels of oil right now are just going to keep this oil price low and lower going into 2026. Yeah, I guess, Rob, then the question becomes, does that make oil and gas stocks uninvestable if the price of their underlying commodity is going down? Does that necessarily mean the stocks will go down? Because guess what? The last few weeks or months, price of oil has gone down or stayed flat and some of these stocks have gone higher. What do you see? Yeah, well, Brian, what I think we see is, you know, if there's been amazing discipline, capital discipline in the oil and gas sector. And so if you look at the energy sector, if you're an investor and you're looking for a free cash flow, I mean, these stocks are trading at 10 times their free cash flow. And you look at the broad market, it's trading a much higher multiple than that. And so I think investors are seeing free cash flow, capital discipline, and they'll see the market adjust, the oil market or the companies to adjust to the lower oil price. And there's a lot of dividends out there. And that's what we like at Tortoise, is the companies that they can provide those secure dividends that have been disciplined with their capital spending because they can not only pay their existing dividends, but also raise their dividends and well into the future, well into the future as well. You know, John, it's interesting because we have these big debates about when and how AI is going to improve productivity in corporate America. But look no further, perhaps, than oil fields here in the U.S. And even as you have recounts coming off, you have a company like Baker Hughes beginning to add more AI to the process and productivity of the wells is going up. So what is that doing to the cost to pull a barrel out of the ground here in the U.S.? And what does that mean for production? Well, it keeps getting driven down. You've seen production do nothing but go up, even in a relatively low price environment. I mean, to have oil even in the 60s and see the kind of advances that we've seen in U.S. oil production, again, just remarkable, because it's not even just AI technology and the ability to find now where the oil is more than ever before, but also the technology to get it out of the ground. They've gone from water to now they've moved on to gel. There's other technologies being employed by the big majors like Exxon, Chevron. And as was just pointed out, when you talk about the big majors like that, they have the money to cover their dividend. They have the money to cover their cost of production in the shell patches that's really paying off for them now. You're getting paid to wait there. And look, the oil industry and the oil market has a history of tumult. So you're getting paid to wait. It's an event risk play on top of being a value play in my estimation here.

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