We are excited to share this Special Edition featuring Rob Connors, Founder of The Crude Chronicles. Rob is a longtime sell-side research analyst who covered companies across oil and gas, industrials, transportation, and aerospace and defense before launching The Crude Chronicles. His Substack offers in-depth analysis of energy markets, industry investment cycles, capital allocation, and historical trends. We have gotten to know Rob over the past few years and are avid readers of his work. We were delighted to host Rob for a wide-ranging discussion on global refining markets, capital allocation and executive incentives, and the long-term outlook for oil and natural gas.
In our conversation, Rob shares his outlook for global refining markets, the potential for “peak refining,” and why he believes refining margins could remain structurally elevated for years to come. We discuss the impact of the Iran conflict and Strait of Hormuz disruptions on global refining capacity, the importance of secondary processing units in determining refinery profitability, and the supply-demand outlook for gasoline, diesel, and jet fuel. Rob walks us through historical refining cycles, comparisons to the 2021–2022 diesel price spike, and why limited new capacity and low refined product inventories could contribute to prolonged market tightness. We explore how a resolution to the conflict could impact crack spreads and the growing importance of refining capacity for energy security.
We then turn to capital allocation across the energy industry and Rob’s detailed work analyzing executive compensation structures to understand corporate behavior and investment cycles. Rob explains how refiners and oil-focused E&P companies have increasingly prioritized returns on capital and shareholder distributions over production growth, and how these incentives have shaped investment decisions. We discuss shifting priorities among European integrated oil companies, including BP, the potential influence of shareholder activism, and whether the industry has moved from overinvestment to underinvestment. We also explore parallels between historical Big Oil investment cycles and today’s technology sector, where growth-oriented executive incentives are helping drive significant AI-related capital spending.
We discuss the outlook for natural gas, including expectations for demand growth, continued supply expansion, and differences in capital allocation incentives between oil-focused and natural gas-focused E&P companies. Rob shares his perspectives on slowing oil well productivity growth, the relationship between geology and technology, rising development costs, and the implications for long-term oil prices, exploration, and oilfield services. We also touch on opportunities in Canadian oil and gas, rising U.S. LNG development costs, labor constraints, and the origins of The Crude Chronicles, including Rob’s approach to historical energy market analysis and independent research. It was a fascinating tour de force of Rob’s research and latest insights.
Mike Bradley kicked off the discussion by reiterating that markets remain heavily influenced by key economic reports. September CPI came in slightly hotter than expected at 3.7%, pushing the benchmark 10-year Treasury yield intraday to ~5.25%, up ~5 basis points on the day. September PPI is scheduled for release on Thursday, with consensus expectations of a 5.4% year-over-year increase. Both reports will play an important role in shaping expectations for the Federal Reserve’s next interest rate decision at its October 28 FOMC meeting. Turning to oil markets, WTI crude was trading at ~$95/bbl, up ~$1/bbl on the day and ~$3–4/bbl over the previous five trading days. Oil prices remain volatile as markets react to missile strikes against Saudi Arabia and ongoing geopolitical tensions across the Gulf region.
In broader equity markets, the S&P 500 was down ~1% on the day, driven by weakness in Financials and Technology. Bank of America shares declined ~7–8%, weighing on the broader banking sector, while semiconductor stocks continued to face selling pressure, with the SOX Index down ~3–4% on the day and ~10% over the previous five trading days. Energy was among the S&P 500’s best-performing sectors, gaining ~0.5–0.6% on stronger crude prices. Mike also highlighted National Fuel Gas Company’s announcement of plans to separate its integrated Upstream and Gathering businesses into two publicly traded companies.
Thanks again to Rob for joining us. We hope you enjoy the conversation as much as we did!