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Oversupply Narrative Keeps Pressure on US Exploration, Production Stocks, RBC Says

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US exploration and production stocks remained under pressure as lower oil prices and persistent oversupply concerns weighed on sector sentiment, RBC Capital Markets said in a note on Wednesday.

RBC said US drilling activity remained largely unchanged, with Permian rig counts only slightly higher year to date. Private operators have increased activity, although weaker oil prices could slow that trend.

Oil prices remained below $70 per barrel as markets assessed US-Iran talks that suggested improved shipping through the Strait of Hormuz.

RBC said the oversupply narrative remained dominant as Russian and Saudi supply increased while the UAE boosted crude exports to a record 3.7 million barrels per day in June after leaving the Organization of the Petroleum Exporting Countries in May.

A 3.8 million-barrel decline in commercial crude inventories, together with a 5.5 million-barrel release from the Strategic Petroleum Reserve, reduced total US oil inventories to their lowest level since 1984, RBC said, citing Department of Energy data.

Gas-weighted exploration and production companies gained 2% over the past week, while oil-weighted peers lost 3%.

Large-cap stocks dropped 4% and small- and mid-cap names fell 2%, even as the SPDR S&P Oil & Gas Exploration & Production ETF advanced 1% despite a 3% decline in West Texas Intermediate crude and a 1% drop in Henry Hub natural gas prices.

Generalist investors have shown greater interest in energy valuations, although conversations continue to center on macroeconomic conditions and the improving outlook for natural gas equities, RBC said.

As the second-quarter 2026 earnings season approaches, RBC expects specialist investors to step up activity.

The bank said commodity price movements and merger-and-acquisition opportunities continue to dominate discussions, with EOG Resources (EOG), Devon Energy (DVN), EQT (EQT), Permian Resources (PR) and California Resources (CRC) emerging as investor favorites.

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Commodities

NRC Proposes Broad Overhaul of Nuclear Power Plant Licensing Rules

The US Nuclear Regulatory Commission on Wednesday proposed sweeping reforms in what it described as its most comprehensive update to nuclear power plant licensing in decades.The proposal would update licensing, safety oversight and siting requirements across every stage of a nuclear plant's lifecycle, from design and construction through operation, license renewal and decommissioning.The NRC said the proposal draws on decades of operating experience, lessons from new reactor licensing and the emergence of advanced reactor technologies. It also advances reforms required under the ADVANCE Act of 2024 and Executive Order 14300."This proposed rule strips out rigid frameworks and unnecessary conservatism to accelerate the safe deployment of new reactors and expand existing capacity across America," NRC Chairman Ho Nieh said.The proposal would streamline reactor construction by concentrating regulatory oversight on the most safety-significant systems and permitting certain early site activities under a general license after an application is docketed.Applicants and licensees would gain greater flexibility to use risk-informed methods instead of traditional approaches for safety reviews and model updates. The proposal also expands performance-based emergency planning to all reactor types.The proposal would let operators adopt an internationally recognized quality assurance standard. It also extends license renewal periods, broadens siting rules and introduces more flexible decommissioning funding requirements for advanced reactors.The NRC also proposed updating safety rules to support higher-enriched and accident-tolerant fuels by focusing on credible, risk-significant scenarios.Separately, in a related proposal also released Wednesday, the NRC unveiled revisions to its radiation protection regulations.While the proposed changes retain existing public and worker dose limits, they would replace the long-standing "as low as reasonably achievable" or the ALARA principle with a framework centered on compliance with established regulatory precautions and existing dose limits.According to the NRC, the current dose limits are already set well below levels associated with known health effects, and maintaining ALARA as a separate regulatory expectation has added costs and complexity without delivering measurable safety benefits."We're raising the standard for regulatory clarity, not lowering the standard for safety," Nieh said, adding that the proposal would not alter existing public or occupational radiation exposure limits.The regulator said the proposal is part of its broader effort to modernize its regulatory framework, reduce unnecessary compliance burdens, and ensure its rules reflect current science while maintaining public health and safety protections.The NRC will accept public comments for 45 days after the proposal is published in the Federal Register and plans to hold a public meeting during the comment period.

Commodities

China's 2026 LNG Demand Outlook Weakens as Industrial Consumption Slows, Kpler Says

Kpler lowered its 2026 China LNG demand forecast to 63.5 million metric tons as it expects weaker industrial activity to weigh on consumption later this year, the firm said in a Wednesday note.Kpler expects industrial activity to remain broadly stable through July and August before slowing in Q4, as weaker petrochemical, property and glass sectors reduce industrial gas consumption.Analysts expect Asian spot LNG prices to remain rangebound through Q3 as restocking demand supports the market. The firm expects prices to turn more bearish in Q4 as weaker industrial LNG consumption eases buying interest.China's apparent gas consumption fell 4% over the year to 34.98 billion cubic meters in April, according to the National Development and Reform Commission. Kpler estimates industrial gas demand declined by about 1.9 bcm over the year in May.Industrial gas demand came under pressure as supply concerns surrounding the Strait of Hormuz lifted Asian LNG prices, Kpler said. The firm expects the US-Iran peace deal to ease geopolitical risks and boost Middle Eastern methanol exports to China.Lower geopolitical risk following the US-Iran peace deal should increase Middle Eastern methanol shipments into China, loosening the domestic methanol market and weighing on local methanol production, Kpler said.Methanol-to-olefin economics have recovered modestly since gross margins fell to -$108 per metric ton in early June. However, Kpler said weak downstream petrochemical demand is likely to cap further margin gains and limit additional gas consumption.China's property downturn and persistent overcapacity across the solar supply chain are expected to reduce glass production in Q4, adding further pressure to industrial gas demand, according to the note.China's transport-sector LNG demand has also begun to soften. LNG truck sales reached 13,900 units in May, holding broadly steady over the year while remaining above the five-year average.Despite LNG's fuel-cost advantage over diesel, Kpler expects improving economics for electric heavy trucks to slow LNG truck adoption. Lower fleet utilization and weaker freight activity are also expected to weigh on demand through the fourth quarter.Reflecting those headwinds, Kpler reduced its 2026 China LNG demand forecast by 200,000 mt to 63.5 million mt, citing weaker industrial gas consumption later in the year.

Commodities

US Natural Gas Update: Futures Fall on Expectations of Larger Storage Build

US natural gas futures extended losses in after-hours trading on Wednesday as expectations for a larger-than-average increase in domestic gas inventories outweighed support from an intense heatwave expected to drive cooling demand across much of the country.The front-month Henry Hub contract and the continuous contract fell 1.95% to $3.211 per million British thermal units.Market participants await Thursday's weekly US Energy Information Administration storage report. According to Barchart, analysts expect natural gas inventories to rise by about 83 billion cubic feet for the week ended June 26, well above the five-year average injection of 64 Bcf for the corresponding week.Gelber & Associates projected an 81 Bcf storage injection. "For now, the market is not ignoring the heat, but it is also not treating it as a reason for a clean breakout while storage remains healthy and the forecast moderates beyond the front-end heat pulse," Gelber & Associates said in a Wednesday market note. "Furthermore, most forecasting models have maintained warmer-than-normal summer temperatures for the past few months, so it is likely priced in at face value."Near-term weather conditions, however, remain supportive of demand. Forecasts for July 1-5 continue to call for triple-digit daily highs across major population centers in the Midwest and Eastern US, lifting electricity demand and projected natural gas consumption.However, prices also came under pressure as weather forecasts for mid-July turned slightly cooler, potentially easing demand for air conditioning among power generators. Barchart reported that the Commodity Weather Group expects near-normal seasonal temperatures across the eastern US during July 6-15.Barchart, citing BNEF data, said Lower 48 US gas demand reached 80.2 Bcf per day on Wednesday, up 0.8 Bcf from the previous day and 4.0% higher than a year earlier. Celsius Energy estimated power-sector gas consumption at 39.2 Bcf on June 29, an increase of 3.9 Bcf from the previous day, although still 3.4 Bcf below the same day last year.On the supply side, US dry gas production averaged 110.5 Bcf/d on Wednesday, down 1.6 Bcf from the previous day but still 1.7% above year-earlier levels, reflecting continued robust output.Meanwhile, estimated net feedgas flows to US LNG export terminals slipped by 0.5 Bcf/d to 19.2 Bcf/d on Wednesday, remaining at historically strong levels and up 0.7% from a week earlier.