In an interview with CNBC on November 26, Daan Struyven, Co-Head of Global Commodities Research at Goldman Sachs, discussed the current state of the oil market and the potential impact of a ceasefire in the Middle East on oil prices.
Struyven noted that while the geopolitical risk premium in oil prices was fairly modest, he thinks that the market is focused on risks with a clear path to lower production. The market has not yet fully priced into this possibility, and the current price of oil is too low compared to inventory fundamentals.
Struyven pointed out that global oil inventories have edged down this year, and the market has been in a deficit of around 0.5% of global markets. He thinks that many oil investors are pricing in a large surplus for 2025, which Struyven believes is not done yet and he sees significant upside risk to prices in the short term, potentially coming from lower production from Iran.
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Struyven noted that while the Trump administration’s goals are achievable, they are largely driven by technological advancements and LNG export plans that are already underway despite any policy change. He also agreed that the big oil companies are not eager to spend more money on production on current oil prices.
Struyven also highlighted OPEC’s influence on the market, emphasizing Saudi Arabia’s preference for higher oil prices. He suggested that OPEC would likely defend a price floor of around $70 per barrel but would not hesitate to increase supply if prices climb above $80. This aligns with his expectation that oil prices will remain within a range of $70 to $85 per barrel.
Finally, Struyven attributed the changes in the oil market to the success of US shale production, which has accounted for 100% of global oil production growth over the past decade. This has put downward pressure on long-term prices, making it less likely for oil prices to spike above $100 as they did in the past.
The oil market is influenced by a range of factors, including geopolitical risks, production levels, and OPEC’s strategies. The potential for a ceasefire in the Middle East, for example, could impact prices, but the geopolitical risk premium is still relatively modest. Despite this, oil prices remain lower than expected based on inventory fundamentals. While these dynamics shape the near-term outlook, long-term oil price increases above $100 are less likely due to the impact of US shale production, which has accounted for all global oil production growth over the past decade. With that in context let’s take a look at the 10 oil stocks with biggest upside potential according to analysts.
A row of massive oil rigs in a desert landscape, against a setting sun.
Our Methodology
For this article, we sifted through Energy ETFs and online rankings to form an initial list of 35 Oil stocks. We then sourced the analysts’ average price targets and picked the 10 stocks that had the highest upside potential, as of November 29. We also included their hedge fund sentiment, which was taken from Insider Monkey’s Hedge Fund database of 900 elite hedge funds as of Q3 of 2024. The list is sorted in ascending order of analysts’ average upside potential.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Oil Stocks with Biggest Upside Potential According to Analysts
10. Diamondback Energy, Inc. (NASDAQ:FANG)
Upside Potential: 21.89%
Number of Hedge Fund Holders: 49
Diamondback Energy, Inc. (NASDAQ:FANG), an independent oil and gas company headquartered in Texas, focuses on the exploration and production of crude oil from the Permian Basin. The company primarily supplies domestic refineries and energy distributors. On September 10, Diamondback Energy, Inc. (NASDAQ:FANG) completed its merger with Endeavor Energy Resources, establishing itself as a leading operator in the Permian Basin. Initially announced in February, the deal is valued at $26 billion.
Following the merger, Diamondback Energy, Inc.’s (NASDAQ:FANG) existing shareholders hold approximately 60.5% of the combined company, while Endeavor’s equity holders own the remaining 39.5% stake. Endeavor, a significant player in the Midland area of the Permian shale basin, operates across multiple basins, including the Core 6 counties of the Midland Basin.
The merged entity is projected to produce an impressive 816,000 barrels of oil and gas daily, with a combined footprint spanning about 838,000 net acres. Travis Stice, Chairman and CEO of Diamondback, described the merger as a “transformative” deal that positions the company for continued growth and success.
In the third quarter of 2024, Diamondback Energy, Inc. (NASDAQ:FANG) reported a 13% revenue increase, driven by higher production volumes following the Endeavor merger and a rise in sales of purchased oil. The company also saw a 3% year-over-year growth in sales of natural gas, oil, and natural gas liquids.
9. ConocoPhillips (NYSE:COP)
Upside Potential: 22.20%
Number of Hedge Fund Holders: 66
ConocoPhillips (NYSE:COP) is a leading independent exploration and production company with extensive crude oil operations worldwide. The company specializes in unconventional oil production from U.S. shale formations and traditional reservoirs in global markets. ConocoPhillips (NYSE:COP) supplies crude oil to refineries, industrial customers, and international markets.
On November 22, ConocoPhillips (NYSE:COP) finalized its acquisition of Marathon Oil Corporation (NYSE:MRO), enhancing its potential for long-term growth. The company anticipates achieving synergies exceeding $1 billion on a run-rate basis within the next 12 months.
On October 31, ConocoPhillips (NYSE:COP) announced its Q3 financial results. During the quarter, the company generated $5.8 billion in cash from operating activities, including $4.7 billion in cash from operations. It also raised its regular dividend by 34% to $0.78 per share and expanded its share repurchase authorization to $20 billion.
ConocoPhillips (NYSE:COP) has presented a 10-year strategic plan emphasizing disciplined investment, steady growth, improved returns, and substantial cash distributions to shareholders. This approach positions ConocoPhillips (NYSE:COP) uniquely among its peers.
8. Occidental Petroleum Corporation (NYSE:OXY)
Upside Potential: 24.34%
Number of Hedge Fund Holders: 71
Occidental Petroleum Corporation (NYSE:OXY) is a global energy company engaged in the exploration, production, and marketing of crude oil. The company operates extensively across the U.S., the Middle East, and Latin America, serving as a key supplier of crude oil to refineries and various industrial sectors.
In the third quarter, Occidental Petroleum Corporation (NYSE:OXY) reported a net income of $964 million and an operating cash flow of $3.8 billion, surpassing expectations. The company’s production reached 1,412 Mboed, exceeding forecasts by 22 Mboed, with the Permian Basin playing a significant role. Furthermore, Occidental Petroleum Corporation (NYSE:OXY) successfully reduced its debt, paying down $4 billion and achieving nearly 90% of its short-term $4.5 billion debt reduction goal just two months after completing the CrownRock acquisition.
Looking ahead, Occidental Petroleum Corporation (NYSE:OXY) plans to sustain a five-rig program within its CrownRock assets through 2025, targeting mid-single-digit production growth. The company also aims to maintain flexibility in its capital expenditures across its U.S. onshore portfolio to respond to fluctuations in commodity prices. With the integration of CrownRock assets and strong performance from new wells in the Permian Basin, Occidental expects to reach a production level of 1,450 Mboe/d in the fourth quarter.
7. Shell plc (NYSE:SHEL)
Upside Potential: 25.04%
Number of Hedge Fund Holders: 48
Shell plc (NYSE:SHEL) is a multinational energy company with a diversified portfolio in oil, gas, and chemicals. The company earns revenue through the exploration, refining, and marketing of hydrocarbons, as well as from its growing renewable energy segment. Shell plc’s (NYSE:SHEL) clients range from retail consumers to large industrial buyers. The company is investing heavily in renewable energy sources like solar, wind, and hydrogen while transitioning toward net-zero emissions. Its long-term strategy involves decarbonizing its operations and leveraging digital innovation to improve efficiency.
Shell plc (NYSE:SHEL) has successfully commenced operations at Mero 3 in Brazil and finalized the divestment of Shell Pakistan. These strategic moves have strengthened its portfolio, positioning Shell plc (NYSE:SHEL) to capitalize on future growth opportunities. Shell PLC (NYSE:SHEL) has also showcased remarkable cost-cutting initiatives and operational efficiencies, which significantly bolstered its financial performance.
Aiming to address evolving energy demands, Shell plc (NYSE:SHEL) continues to focus on its core strengths in LNG and low-carbon oil. The company prioritizes customer-centric solutions and leverages its robust trading capabilities to enhance its competitive edge. Shell plc’s (NYSE:SHEL) CEO has emphasized the importance of dynamic capital allocation, highlighting the company’s strategic approach to seeking value across the energy system.
6. TotalEnergies SE (NYSE:TTE)
Upside Potential: 30.64%
Number of Hedge Fund Holders: 17
TotalEnergies SE (NYSE:TTE) is a French multinational energy corporation specializing in oil. TotalEnergies SE (NYSE:TTE) is among the world’s largest energy companies, catering to a wide spectrum of clients, including governments, industries, and individuals, through its integrated energy business that spans crude oil production, natural gas, petrochemicals, and renewables.
TotalEnergies SE’s (NYSE:TTE) hydrocarbons division, which constitutes a substantial portion of the company’s revenue, boasts a strong portfolio of upstream projects poised to drive growth in the years ahead. TotalEnergies SE (NYSE:TTE) has set an ambitious target to increase hydrocarbon production by 3% annually until 2030, supported by six major oil and gas initiatives sanctioned in 2024. Notably, the GranMorgu project in Suriname is a key contributor, with recoverable oil reserves estimated to exceed 750 million barrels.
TotalEnergies SE’s (NYSE:TTE) integrated LNG segment is also expected to bolster growth, highlighted by several medium-term sales agreements signed in Asia. For the nine months ending September 30, the company secured a total of 4 million tons of LNG contracts in the region. Beyond hydrocarbons, TotalEnergies SE (NYSE:TTE) is making substantial investments in renewable energy, aiming for 35% of its electricity generation to come from renewables by 2025.
5. Schlumberger Limited (NYSE:SLB)
Upside Potential: 31.04%
Number of Hedge Fund Holders: 65
Schlumberger Limited (NYSE:SLB) is the world’s largest oilfield services company. The company delivers cutting-edge technology and expertise to oil and gas operators worldwide. It plays a critical role in the crude oil industry, offering drilling, exploration, and production solutions to major clients, including ExxonMobil and Chevron.
On November 12, Schlumberger Limited (NYSE:SLB) introduced Stream, a high-speed intelligent telemetry system designed to enhance drilling performance and reliability in complex wells. Stream integrates proprietary artificial intelligence (AI) algorithms with SLB’s TruLink definitive dynamic survey-while-drilling service.
The introduction of Stream represents a significant advancement in drilling technology. By combining AI and advanced telemetry, Stream empowers operators to drill complex wells with greater precision and confidence, enabling more informed decision-making and improved outcomes.
In the third quarter, Schlumberger Limited (NYSE:SLB) posted a 10% year-over-year revenue increase, reaching $9.16 billion. This growth was driven by a 31% year-over-year surge in revenue from its Production Systems segment to $3.1 billion and an 11% year-over-year rise in digital and integration revenue, supported by the adoption of AI-driven tools and digital solutions. Regional growth was led by Europe & Africa and the Middle East & Asia, each recording a 16% year-over-year increase, while North America experienced a more modest 3% growth.
Schlumberger Limited (NYSE:SLB) is committed to improving crude oil extraction efficiency while minimizing environmental impacts. The company continues to expand its service offerings and leverage digital technologies to optimize resource management. Recently, Schlumberger Limited (NYSE:SLB) has strengthened its digital portfolio by launching the Lumi AI platform and forming strategic partnerships with NVIDIA, AWS, and Aramco.
4. BP p.l.c. (NYSE:BP)
Upside Potential: 32.62%
Number of Hedge Fund Holders: 36
BP p.l.c. (NYSE:BP) is a British multinational vertically integrated oil and gas company headquartered in London. The company operates in all areas of the oil and gas industry, including exploration and extraction, refining, distribution, marketing, power generation, and trading. The company operates in over 80 countries worldwide.
BP p.l.c. (NYSE:BP) is poised for significant growth in the Azerbaijani sector of the Caspian Sea. In the third quarter, the company agreed to jointly explore and potentially develop two promising blocks, including the Karabagh oil field and the Ashrafi-Dan Ulduzu-Aypara (ADUA) area with the State Oil Company of Azerbaijan Republic (SOCAR).
These blocks offer substantial potential for new discoveries and development. By partnering with SOCAR, BP p.l.c. (NYSE:BP) is well-positioned to capitalize on the vast hydrocarbon resources in the region, which is expected to drive significant growth and production increases.
During the third quarter of 2024, BP p.l.c. (NYSE:BP) reported $206 million in profits attributable to shareholders and generated $6.8 billion in operating cash flow. The company also announced a new share buyback program, following the completion of a $1.75 billion buyback program in the second quarter of 2024.
3. Enbridge Inc. (NYSE:ENB)
Upside Potential: 42.85%
Number of Hedge Fund Holders: 26
Enbridge Inc. (NYSE:ENB) is a leading energy infrastructure company that operates in the liquids pipelines, gas transmission, gas distribution and storage, and renewable power sectors. The company’s business model is centered around providing critical energy infrastructure services to its clients, including major oil and gas producers, refineries, and power generators. Enbridge Inc.’s (NYSE:ENB) extensive network of pipelines, storage facilities, and renewable energy assets enables it to transport and deliver energy products to markets across North America.
One of the key drivers of Enbridge Inc.’s (NYSE:ENB) growth is its liquid pipelines business. The company has recently acquired two additional docks and land adjacent to its Enbridge Ingleside Energy Center (EIEC) facility, which is one of the largest crude oil storage and export terminals in the US and will enable optimization of its existing docks and increase Very Large Crude Carrier windows.
Enbridge Inc.’s (NYSE:ENB) gas transmission business is also a significant contributor to its growth, with the company recently acquiring a 15% interest in the Delaware Basin Residue (DBR) natural gas system, which serves as a key conduit for the Whistler Pipeline.
Enbridge Inc. (NYSE:ENB) is also making significant investments in renewable energy, with the recent sanctioning of the Sequoia Solar project, a two-phase 815MW solar farm in Texas. The project is substantially contracted under long-term fixed-price power purchase agreements with strong investment-grade counterparties, including AT&T and Toyota.
2. Suncor Energy Inc. (NYSE:SU)
Upside Potential: 58.03%
Number of Hedge Fund Holders: 47
Suncor Energy Inc. (NYSE:SU) based in Canada, specializes in oil sands development, refining, and marketing petroleum products. The company generates revenue through the production and sale of crude oil, gasoline, diesel, and petrochemicals. Suncor Energy Inc.’s (NYSE:SU) clients include industrial users, retailers, and transportation sectors.
Suncor Energy Inc.’s (NYSE:SU) Firebag oil sands site, which utilizes steam-assisted gravity drainage technology, has been a game-changer for the company, with production rising to a record 284,000 barrels per day in October, a 2% hike from the previous month.
Suncor Energy Inc. (NYSE:SU) is leveraging its Firebag’s growth in a deliberate move to mitigate the expected decline in production from its Base Plant oil sands mine, which is anticipated to reach the end of its life in about 10 years. The company is confident in the Firebag site’s potential, which has already achieved five record months of output this year.
While the upcoming Fort Hills mine is expected to contribute to Suncor Energy Inc.’s (NYSE:SU) overall production capacity, Firebag’s outstanding results have positioned it as a key asset for the company’s future growth. The site’s ability to replace up to 30% of the production lost from the Base Plant mine makes it an indispensable component of the company’s long-term strategy. As Suncor Energy Inc. (NYSE:SU) continues to invest in Firebag’s expansion, the company is poised to maintain its position as a leader in the oil sands industry.
1. Canadian Natural Resources Limited (NYSE:CNQ)
Upside Potential: 63.04%
Number of Hedge Fund Holders: 48
Canadian Natural Resources (NYSE:CNQ) is one of Canada’s largest independent crude oil and natural gas producers. The company manages a diverse portfolio of assets, including significant operations in Western Canada, the United Kingdom, the North Sea, offshore Africa, and various other international locations.
Canadian Natural Resources (NYSE:CNQ) has announced that it has entered into an agreement to acquire a 20% interest in the Athabasca Oil Sands Project (AOSP) from Chevron Canada Limited. This acquisition will increase the company’s total interest in AOSP to 90%. The deal includes a 20% stake in the Muskeg River and Jackpine mines, the Scotford Upgrader, and the Quest Carbon Capture and Storage facility. The acquisition is expected to add approximately 62,500 barrels per day of synthetic crude oil production to the company’s portfolio.
In a separate deal, Canadian Natural Resources (NYSE:CNQ) has also agreed to acquire Chevron’s 70% operated working interest in light crude oil and liquids-rich assets in the Duvernay play in Alberta. This acquisition is expected to add approximately 60,000 barrels of oil equivalent per day to the company’s production in 2025. The Duvernay assets are expected to provide near-term growth and contribute to the company’s free cash flow.
The two acquisitions are expected to close in the fourth quarter of 2024. The total consideration for the deals is approximately US$6.5 billion. The acquisitions are expected to add approximately 122,500 barrels of oil equivalent per day to the company’s production in 2025 and increase the company’s total proved and probable reserves by approximately 1,448 million barrels of oil equivalent.
While we acknowledge the potential of Canadian Natural Resources (NYSE:CNQ) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CNQ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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