US stock energy sector welcomes policy support! Trump signs memorandum: Inject federal funds into coal, oil, gas, and power grid facilities.

The White House announced on Monday that Trump signed a series of presidential memoranda invoking the Defense Production Act to provide federal funds for various energy projects. Previously, the U.S. government faced pressure to curb rising costs of oil, gasoline, and electricity. Trump signed five memoranda under the law, targeting coal supply chains, domestic oil production, natural gas transportation and liquefaction capacity, and electrical grid infrastructure - Trump stated that deficiencies in these areas threatened national security. Flow of U.S. government funds to the energy sector The Defense Production Act (DPA) was enacted in the early stages of the Korean War in 1950, initially aimed at ensuring the supply of strategic materials such as steel and aluminum. In the early stages of the COVID-19 pandemic, both the Trump and subsequent Biden administrations had used the law to accelerate the production of ventilators and personal protective equipment. This move, while leveraged energy infrastructure investments, also sent a serious signal to the market: in Washington's assessment, the vulnerability of American energy supply has risen to the level of "national security threat." However, the context of this DPA use is completely different. The five memoranda signed by Trump specifically target the traditional energy sector: supply chains to maintain coal-fired power plants, domestic refining capacity, natural gas pipeline transport, large transformers and gas turbine manufacturing. Eligible projects may include coal-fired power plants, refineries, and facilities producing gas turbines and transformers - equipment that has been facing shortages. Legal experts point out that invoking the DPA means that the Department of Energy will receive extraordinary administrative authority, allowing it to provide loans, procurement commitments, or even issue compulsory production orders directly to private enterprises. The source of funding points to the massive climate and energy expenditure package reserved in last year's "Big and Beautiful Act." When signing, Trump emphasized that the deficiencies in these areas are "threatening national security" - this classification bypasses the lengthy debate in Congress about clean energy subsidies and directly elevates the foundational position of fossil fuels to a high defense level. Behind the policy is a cold industrial reality. The U.S. power grid is facing severe equipment aging and replacement bottlenecks, with average delivery times for large transformers used for voltage boosting and distribution exceeding two years, and prices skyrocketing. The intervention of DPA funds is expected to stimulate domestic production capacity and alleviate transmission bottlenecks. But for the struggling coal industry, facing a tough road under the dual pressure of climate agenda and economics, there may be a glimmer of hope. The memorandum explicitly mentions that coal-fired power plants may qualify for funding. Analysts believe that this move is not intended to reverse the tide of energy transition, but to shore up "basic power supply security" in the face of extreme weather and geopolitical conflicts. For the oil and gas industry, the targeted injection of funds aims to accelerate the construction of liquefied natural gas (LNG) export terminals and pipelines, consolidating the United States' central position as an alternative energy supplier to Europe and Asia. For investors, the activation of the DPA may mean that the policy bottom of the energy sector has been reached. Whether it is transformer manufacturers, natural gas pipeline operators, or struggling coal companies, they will receive low-interest liquidity from the federal government. However, until the alarm in the Strait of Hormuz is lifted, the rough waves in the oil market will continue to dominate global asset volatility. Energy prices are difficult to decline It is worth noting that the timing of the White House's announcement of the DPA invocation coincides with the tense situation in the Strait of Hormuz. As the two-week ceasefire negotiations have reached a deadlock, the U.S. and Iran have returned to a mode of "threats and accusations," keeping the world's most important oil transit chokepoint closed. Robert Yawger, an analyst at Mizuho Securities, bluntly stated in a report: "The optimism that swept the market on Friday has now been replaced by threats and accusations. With each day that the Strait of Hormuz remains closed, the world is one step closer to an energy crisis." The Citigroup analyst team has provided a quantitative warning: if maritime traffic in the strait is interrupted for another month, Brent crude oil could surge to $110 per barrel. On Monday, crude oil futures recovered more than half of the losses from last Friday, as the prospect of peace talks between the U.S. and Iran as the two-week ceasefire draws to a close, and the uncertainty over the status of the Strait of Hormuz reignited supply concerns. New York Mercantile Exchange near-month crude oil futures for May delivery rose 6.9% to $89.61 per barrel; Brent crude oil futures for June delivery rose 5.6% to $95.48 per barrel, marking the largest single-day gain for the two major benchmark crude oil futures since April 2. Compared to the rough waves in the oil markets, slight boosts from cooler temperature expectations, U.S. natural gas futures rose slightly for the fourth consecutive trading day; the May near-month contract on the New York Mercantile Exchange settled at $2.689 per million British thermal units, up 0.6%. This was due to the relative independence of U.S. domestic supply and demand and slight adjustments in temperature expectations. But the support for natural gas pipelines and LNG export facilities in the DPA implies that the policy balance in the U.S. midterm election year is tilting towards "low-cost energy" and "export dividends." As the summer peak electricity demand approaches, if the coal supply chain regains flexibility under the auspices of the DPA, it may help cushion the marginal cost pressures on natural gas-fired electricity. --- This text has been translated and presented in 3 parts due to the character limit.