In this article, we discuss 10 oil stocks to buy amid the Ukraine crisis. If you want to skip our detailed analysis of these stocks, go directly to 5 Oil Stocks To Buy Amid Ukraine Crisis.
Oil prices have surged tremendously owing to the Ukraine-Russia tensions, since supply disruption worldwide is on the horizon. Brent crude oil, an international benchmark for oil prices, climbed to a seven-year peak of more than $99 a barrel after Russian president Vladimir Putin sent troops into Ukraine. On Thursday, Brent rose above $105 a barrel for the first time since 2014.
Joe Biden announced that the United States and its allies will impose “severe sanctions” on Russia in light of these attacks. Russia is the second largest oil exporter after Saudi Arabia and the biggest global producer of natural gas, and the sanctions will impact Russian financial institutions, businesses, and other government entities, in an attempt to limit the Russian government’s capacity to raise money from Western financial markets. According to President Biden, defending NATO territory could directly impact the public in terms of higher energy prices.
“Simply No Alternatives”
Troy Vincent, senior market analyst at DTN Markets, told CNBC “there are simply no alternatives” to Russian supplies of oil and gas “that do not entail far higher prices and potentially the development of severe shortages”.
Energy prices rose close to 30% in Europe after these attacks since oil and gas is transmitted mainly through Ukraine, with Russia being the primary supplier. Similarly, if the major superpowers successfully isolate Russia and make oil deals with Iran instead, prices will rise globally since the influx of demand cannot be matched sufficiently as Iran cannot compete with Russia’s volumes of oil.
Rory Johnson, managing director and market economist at Toronto-based Price Street Inc., forecasted that in case of an all-out war between Russia and NATO forces, oil prices could skyrocket, reaching “$130, $150 – pick a number in the hundreds and you could very easily justify it”.
Amid rising tensions, accelerating oil prices, and market uncertainty, some of the best oil names in the market include Chevron Corporation (NYSE:CVX), Exxon Mobil Corporation (NYSE:XOM), and Shell plc (NYSE:SHEL).
Photo by Zbynek Burival on Unsplash
Our Methodology
We selected oil stocks which were recently supported by positive analyst ratings amid an uncertain economic outlook and crashing stock markets. JPMorgan also ranked most of these stocks as “outperformers.”
A broader gain in oil prices will boost the fundamentals of these stocks in the months to come.
We have also mentioned the hedge fund sentiment around each stock, which was determined from the 924 elite funds tracked by Insider Monkey as of Q4 2021.
Oil Stocks To Buy Amid Ukraine Crisis
10. Valero Energy Corporation (NYSE:VLO)
Number of Hedge Fund Holders: 35
Valero Energy Corporation (NYSE:VLO) is a Texas-based oil and gas company that manufactures and markets gasoline, ethanol, diesel fuel, ultra-low-sulfur diesel, jet fuel, asphalt, petrochemicals, and lubricants. In the last six months, the stock has gained almost 33%.
On January 27, Valero Energy Corporation (NYSE:VLO) announced earnings for the fourth quarter. The company posted an EPS of $2.47, beating estimates by $0.63. Revenue for the period jumped 116.23% year-over-year to $35.90 billion, topping estimates by $7.89 billion.
Piper Sandler analyst Ryan Todd on January 25 raised the price target on Valero Energy Corporation (NYSE:VLO) to $95 from $83 and kept an Overweight rating on the shares. While the multi-year bull case for crude oil is now largely consensus, few in the market are convinced of a similar, multi-year setup for the U.S. refiners, the analyst told investors in a research note.
Valero Energy Corporation (NYSE:VLO) declared on January 20 a $0.98 per share quarterly dividend, in line with previous. The dividend will be paid on March 3, to shareholders of record on February 3. Valero Energy Corporation (NYSE:VLO) priced a public offering of $650 million aggregate principal amount of 4.0% Senior Notes due 2052 on February 2.
According to the fourth quarter database of Insider Monkey, 35 hedge funds were bullish on Valero Energy Corporation (NYSE:VLO), up from 32 funds in the prior quarter. Ken Griffin’s Citadel Investment Group held the largest stake in Valero Energy Corporation (NYSE:VLO), with 1.3 million shares worth $104.5 million.
Hedge fund sentiment was positive around Valero Energy Corporation (NYSE:VLO) in the fourth quarter of 2021, just like Chevron Corporation (NYSE:CVX), Exxon Mobil Corporation (NYSE:XOM), and Shell plc (NYSE:SHEL).
9. Marathon Oil Corporation (NYSE:MRO)
Number of Hedge Fund Holders: 40
Based in Houston, Texas, Marathon Oil Corporation (NYSE:MRO) is a successor of Standard Oil that produces petroleum, natural gas, and natural gas liquids. Publishing its Q4 earnings report on February 16, Marathon Oil Corporation (NYSE:MRO) posted an EPS of $0.77 and a $1.80 billion revenue, both above market consensus.
Marathon Oil Corporation (NYSE:MRO) declared on January 26 a per share quarterly dividend of $0.07, a 16.7% increase from its prior dividend of $0.06. The dividend is distributable on March 10, to shareholders of record on February 16.
On February 23, Piper Sandler analyst Mark Lear upgraded Marathon Oil Corporation (NYSE:MRO) to Overweight from Neutral with a price target of $27, up from $22. The company “abruptly shifted from balance sheet repair to shareholder return” in Q4, the analyst told investors in a bullish note. He upgraded Marathon Oil Corporation (NYSE:MRO) on the back of its “strong shareholder return message.”
In Q4 2021, 40 hedge funds in the database of 924 elite funds tracked by Insider Monkey held long positions in Marathon Oil Corporation (NYSE:MRO), with combined stakes amounting to $969 million. Holocene Advisors was the biggest stakeholder of the company, with 9.3 million shares worth roughly $154 million.
8. Marathon Petroleum Corporation (NYSE:MPC)
Number of Hedge Fund Holders: 41
Marathon Petroleum Corporation (NYSE:MPC) is an American company engaged in oil refining, in addition to transporting petroleum, petrochemicals, and gasoline.
Marathon Petroleum Corporation (NYSE:MPC) announced its Q4 results on February 2, posting earnings per share of $1.30, exceeding estimates by $0.74. Revenue over the period increased almost 96% from the prior-year quarter, reaching $35.61 billion, outperforming estimates by $9.82 billion.
Cowen analyst Jason Gabelman raised the price target on Marathon Petroleum Corporation (NYSE:MPC) to $90 from $83 and kept an Outperform rating on the shares on February 3. The analyst said the shares should sustain earnings-day outperformance versus peers despite one-time tailwinds in results.
On January 27, Marathon Petroleum Corporation (NYSE:MPC) declared a quarterly dividend of $0.58, in line with previous. The dividend is payable on March 10, for shareholders of record on February 16.
Among the hedge funds tracked by Insider Monkey, 41 funds were bullish on Marathon Petroleum Corporation (NYSE:MPC), with total stakes valued at $2.2 billion. Paul Singer’s Elliott Management held the leading position in Marathon Petroleum Corporation (NYSE:MPC), with 10.5 million worth $676.3 million.
Here is what Clark Street Value has to say about Marathon Petroleum Corporation (NYSE:MPC) in its Q4 2021 investor letter:
“During the worst of covid, I bought some LEAPs on Marathon Petroleum (MPC) as a proxy for Par Pacific (PARR) since long dated options weren’t available on the later. Those MPC calls expire next month and I’ll take profits, with PARR I’ve reduced my position throughout the year and might sell the rest early next year, I’ve owned it for 6-7 years and it has gone nowhere, they haven’t touched the NOLs, just a difficult business that I probably don’t understand as well as I should.”
7. Shell plc (NYSE:SHEL)
Number of Hedge Fund Holders: 41
Shell plc (NYSE:SHEL) is a British multinational oil and gas supermajor that explores, transports, and refines LNG, lubricants, natural gas, petrochemicals, and petroleum.
Cowen analyst Jason Gabelman raised the price target on Shell plc (NYSE:SHEL) to $58 from $53 and kept an Outperform rating on the shares on February 3. The company is exploring ways to upgrade its cash return framework, which could come with the Q2 earnings, the analyst told investors, and believes the prospect of “upgrading an already attractive cash return story should be supportive” of the shares.
Shell plc (NYSE:SHEL) reported on February 3 its fourth quarter results. The company posted an EPS of $1.66, surpassing estimates by $0.41. Shell plc (NYSE:SHEL)’s revenue jumped roughly 94% year-on-year to $85.28 billion, outperforming market consensus by $26.62 billion.
On February 3, Shell plc (NYSE:SHEL) declared a quarterly dividend of $0.48 per average diluted share, in line with previous. The dividend is payable on March 28, for shareholders of record on February 18. Share buybacks of $8.5 billion for the first half of 2022 were also announced by Shell plc (NYSE:SHEL).
The fourth quarter database suggested that 41 hedge funds were bullish on Shell plc (NYSE:SHEL), up from 33 funds in the preceding quarter. Fisher Asset Management owned the largest stake in Shell plc (NYSE:SHEL), with 18.7 million shares worth $813 million.
Here is what Goehring & Rozencwajg Associates has to say about Royal Dutch Shell plc (NYSE:SHEL) in its Q3 2021 investor letter:
“Royal Dutch Shell’s ESG challenges continue unabated. A Dutch court ruled in May that Royal Dutch Shell must cut its CO2 output by 45% by 2030 to align their policies with the Paris Climate Accord. In a statement issued after the verdict, a Shell spokesperson acknowledged that “urgent action is needed on climate change and the company is accelerating efforts to reduce emissions.” If the pressure from the Dutch court system was not enough, an activist shareholder has proposed breaking the company apart to address ESG concerns. On October 27th, Third Point Management announced the following.
“If Shell pursues this type of strategy it would probably lead to an acceleration of carbon dioxide reduction. […] Breaking Shell into two operating units would create a standalone legacy energy business (upstream, refining, and chemicals) that could slow capex beyond what it has already promised, sell assets, and prioritize return of cash to shareholders which can be reallocated into low-carbon areas of the market.”
Shell has already cut spending dramatically over the last decade. After having peaked at $39 bn in 2013, upstream capital spending fell to only $17 bn in 2020 – a drop of nearly 60%. Spending has barely recovered in the three quarters of 2021. A lack of spending has already impacted production. Proforma for the 2016 acquisition of BG Group, Shell’s total production has fallen 13% since capital spending peaked in 2013. These trends are accelerating: Shell’s production over the first nine months of 2021 have fallen 7% compared with the same period last year.
If Royal Dutch Shell’s upstream capital spending remains at today’s depressed levels, we estimate the company will only be able to replace 30% of production with new reserves and that production will fall 40% over the next nine years. If spending is further curtailed (as is being proposed), Shell’s oil and natural gas production would collapse – something that may have already started.”
6. Phillips 66 (NYSE:PSX)
Number of Hedge Fund Holders: 41
Phillips 66 (NYSE:PSX) is an American multinational oil and gas company supplying natural gas, petrochemicals, aviation fuels, motor fuels, and lubricants. Phillips 66 (NYSE:PSX) also offers oil refining and service stations.
Among the hedge funds tracked by Insider Monkey in Q4 2021, 41 hedge funds were bullish on Phillips 66 (NYSE:PSX), up from 34 funds in the quarter prior. Israel Englander’s Millennium Management owned the largest stake in Phillips 66 (NYSE:PSX), holding more than 3 million shares worth $228.5 million.
On January 28, Phillips 66 (NYSE:PSX)’s Q4 financial results were published. The company posted earnings per share of $2.94, beating consensus estimates by $1.01. Revenue over the period jumped over 100% year-on-year to $33.57 billion, exceeding market estimates by $6.17 billion.
Phillips 66 (NYSE:PSX) declared on February 9 a $0.92 per share quarterly dividend, payable on March 1, to shareholders of record on February 22, offering a forward yield of 4.11%.
RBC Capital analyst Elvira Scotto raised the price target on Phillips 66 (NYSE:PSX) to $101 from $97 and kept an Outperform rating on the shares on February 1. The analyst cited the company’s Q4 earnings beat, with strong performance across all segments. He also pointed to the company’s dividend increase during the quarter, along with its stated intention to resume share purchases in 2022.
In addition to Chevron Corporation (NYSE:CVX), Exxon Mobil Corporation (NYSE:XOM), and Shell plc (NYSE:SHEL), institutional investors are pouring into Phillips 66 (NYSE:PSX).
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Disclosure: None. 10 Oil Stocks To Buy Amid Ukraine Crisis is originally published on Insider Monkey.
