In this article, we discuss the 11 best crude oil stocks to buy as tensions rise. To skip the detailed analysis of the crude oil market, go directly to the 5 Best Crude Oil Stocks To Buy.
Crude oil is one of the most primed industries in the world. However, it is also quite volatile which has been quite evident in recent years. According to Maximize Market Research, the industry’s market size reached $1.4 trillion in 2021 and is expected to grow to $1.6 trillion by 2029. The global oil reserves volume is at around 1.65 trillion barrels while 99.8 million barrels were consumed daily on average in 2022, up from 94.1 million barrels a day in 2021.
Latest Updates on the Crude Oil Market
Crude oil prices went flying shortly after the Russian invasion of Ukraine to around $119 per barrel on March 6 due to sanctions on Russian fossil fuel imports by the USA and part of Europe. However, the prices have dropped down to the pre-war levels with crude oil trading at around $74 per barrel WTI.
The International Energy Agency’s (IEA) February 2023 report predicts that the global oil supply could reach higher than the demand in the first half of 2023. However, we reported previously that for the full year 2023, the global oil demand is expected to increase by 1.9 million barrels per day to just shy of 102 million barrels per day. The biggest factor in this rise in demand is set to come from China as its travel restrictions ease and borders open up. Furthermore, the seasonal demand for crude oil and other fossil fuels in Europe recently rose in winter. However, the US and OPEC warned that they are unable to increase the output which is expected to leave Europe in hot waters as Russia previously cut off some important pipeline flows of natural gas in retribution for imposing energy sanctions backed by the USA.
Additionally, the recent collapse of the Silicon Valley Bank disturbed the equities market which also slightly affected the oil prices as they fell by around 2% on March 13. However, this seems temporary and is expected to be offset by the recovery in demand by China.
Crude Oil Market in the Future
In one of our articles, we highlighted that the global oil demand will reach its peak between 2023 and 2025. Nevertheless, due to climate risks, the world is making a shift toward renewable energy sources which will offset the demand for crude oil and other fossil fuels in the future. The demand for coal-based energy is slowly declining and it is only a matter of time before the fossil fuel demand drop starts affecting crude oil.
Nevertheless, crude oil is a much more important source of energy than coal, so the prices are expected to keep rising till the global crude oil reserves are exhausted in around 47 years. Even though renewable energy sources are taking over, the need for petrochemicals and long-distance travel will still keep the global oil demand stable. The IEA believes that by 2040, the demand will increase to 104.1 million barrels of oil per day from approximately 98 million in 2019. Furthermore, crude oil prices are also expected to increase because as time passes, cheap oil sources are set to decline gradually.
In the current market, crude oil stocks might be volatile but several of them have remained to be some of the most profitable companies in the world and have decent shareholder returns. Some of the crude oil stocks that investors need to look out for are Exxon Mobil Corporation (NYSE:XOM), Occidental Petroleum Corporation (NYSE:OXY), and Schlumberger Limited (NYSE:SLB).
Photo by Zbynek Burival on Unsplash
Our Methodology
We analyzed the global crude oil market and chose the best stocks to buy, keeping their hedge fund sentiment as the most important metric and taking the analyst ratings around each stock into consideration. Most of the companies on the list have strong balance sheets and have maintained good profitability over the years. Moreover, their capital returns have also remained healthy.
We listed the companies in ascending order of their hedge fund sentiment which was taken from Insider Monkey’s database of 943 elite hedge funds. Note that we skipped the companies whose crude oil production covered less than 10% of their business portfolio.
11 Best Crude Oil Stocks To Buy As Tensions Rise
11. Halliburton Company (NYSE:HAL)
Number of Hedge Fund Holders: 50
Halliburton Company (NYSE:HAL) is one of the world’s largest oilfield services and equipment companies. It is an American company with headquarters in Texas, USA, and Dubai, UAE. Halliburton Company (NYSE:HAL) is one of the best crude oil stocks and one of Jim Cramer’s top picks for 2023.
Halliburton Company (NYSE:HAL) is a significantly fairly valued company with a PE ratio of 19.9x at the time of writing, compared to its peer average of 21.2x. Moreover, it is also trading below the US Energy Services industry which has a PE ratio of 23x.
On January 30, HSBC analyst Abhishek Kumar reiterated a Buy rating on Halliburton Company (NYSE:HAL) and raised his price target to $57 from $43.90. The analyst is quite confident in the company’s growth outlook for 2023. Kumar noted that both US and international growth expectations for the company look strong.
In the fourth quarter of 2022, 50 hedge funds held positions in Halliburton Company (NYSE:HAL), up from 48 in the third quarter. The biggest stake in the company was held by Pzena Investment Management, with 7.89 million shares worth $310.624 million. It was followed by Point72 Asset Management which increased its stake in the company by 144% in the fourth quarter to 3.3 million shares worth $129.947 million.
Exxon Mobil Corporation (NYSE:XOM), Occidental Petroleum Corporation (NYSE:OXY), and Schlumberger Limited (NYSE:SLB) are some of the best crude oil stocks along with Halliburton Company (NYSE:HAL).
Aristotle Atlantic made the following comment about Halliburton Company (NYSE:HAL) in its Q3 2022 investor letter:
“Halliburton Company (NYSE:HAL) provides energy, engineering and construction services and is a manufacturer of products for the energy industry. The company offers services and products and integrated solutions to customers in the exploration, development, and production of oil and natural gas. Halliburton operates two business segments: Completion & Production and Drilling & Evaluation.
Our conviction in longer-term operating leverage is supported by the focus on improving cost structures. Upstream oil and gas spending over the longer term can benefit Exploration & Production (E&P) firms from sustained high oil and gas prices and a renewed urgency in global energy security. We believe the rightsizing of the company’s cost structure and forward focus on margins at the same time as E&Ps respond to new investment signals will drive both topline and bottom-line growth.”
10. Diamondback Energy, Inc. (NASDAQ:FANG)
Number of Hedge Fund Holders: 52
Diamondback Energy, Inc. (NASDAQ:FANG) is an American oil and gas company with the entirety of its operations in the Permian Basin. In 2022, the company produced around 386 thousand barrels of oil equivalent per day and had proved reserves of 2.3 billion barrels of oil equivalent; 53% of which was petroleum. Moreover, in 2023, Diamondback Energy, Inc. (NASDAQ:FANG) provided its production guidance at 430 – 440 thousand barrels of oil equivalent per day.
On February 21, Diamondback Energy, Inc. (NASDAQ:FANG) announced a 6.7% increase in its quarterly dividend to $0.80 per share and declared a variable cash dividend of $2.15 per common share.
In the fourth quarter of 2022, 52 hedged funds had a stake worth $1.1 billion in Diamondback Energy, Inc. (NASDAQ:FANG), compared to 55 hedge funds in the previous quarter with a combined value of $910.922 million.
9. Marathon Petroleum Corporation (NYSE:MPC)
Number of Hedge Fund Holders: 52
Marathon Petroleum Corporation (NYSE:MPC) is an Ohio-based petroleum company. In the fourth quarter of 2022, the company made its way to 52 hedge fund portfolios, compared to 50 in the previous quarter. Paul Singer’s Elliott Management was the biggest stakeholder of Marathon Petroleum Corporation (NYSE:MPC) in Q4 with over 11 million shares worth approximately $1.3 billion. Furthermore, in the same quarter, Ken Griffin’s Citadel Investment Group increased its holdings in the company by 338% to $184.9 million.
On March 10, Mizuho analyst Nitin Kumar upgraded Marathon Petroleum Corporation (NYSE:MPC) stock from Neutral to Buy and raised his price target to $160 from $133. The analyst holds a bullish view of the US oil and gas industry after the fourth quarter results. Moreover, out of the 12 Wall Street analysts that have covered Marathon Petroleum Corporation (NYSE:MPC) stock, 11 maintain a Buy or Overweight rating on it and only one of them keeps a Hold rating with an average price target of $147.92.
Along with being one of the best crude oil stocks, Marathon Petroleum Corporation (NYSE:MPC) is also one of the biggest pipeline companies in the world with a network of nearly 14,000 miles.
8. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 55
Devon Energy Corporation (NYSE:DVN) is a US-based hydrocarbon exploration company. It is one of the best crude oil stocks as its operations are diversified across multiple basins which allows the company to produce low-cost crude oil and increase its profit margins. Devon Energy Corporation (NYSE:DVN) had one of the lowest breakeven prices of around $30 per barrel WTI in 2022, which is expected to increase to $40 in 2023 according to the company’s full-year forecast.
Devon Energy Corporation (NYSE:DVN) is highly focused on its shareholder returns and introduced a fixed and variable dividend structure in 2021 where it plans to return almost half of its excess cash flow to its shareholders through variable dividends. On February 14, the company announced an 89-cent fixed plus variable dividend payable by March 31 to the shareholders of record on March 15.
At the end of Q4 2022, 55 hedge funds were bullish on Devon Energy Corporation (NYSE:DVN)’s stock, compared to 51 in Q3 2022. Yacktman Asset Management owned 2.8 million of the company’s shares worth $173.525 million, making it the most significant shareholder of Devon Energy Corporation (NYSE:DVN) in the fourth quarter of 2022.
7. Pioneer Natural Resources Company (NYSE:PXD)
Number of Hedge Fund Holders: 55
Pioneer Natural Resources Company (NYSE:PXD) is a Texan oil and gas company. In 2022, the company produced 240 million barrels of oil equivalent per day while the company’s total proved resources were estimated to be around 2.377 billion barrels of oil equivalent as of December 31, 2022.
According to our database, 55 hedge funds held a position in Pioneer Natural Resources Company (NYSE:PXD) in the fourth quarter of 2022, compared to 49 in the third quarter. Yacktman Asset Management was the most prominent shareholder of the company with 724,827 shares worth over $165.5 million. In the fourth quarter, Citadel Investment Group increased its holdings in the company by a massive 4152% to $137.656 million.
Pioneer Natural Resources Company (NYSE:PXD) posted its annual earnings report last month and showed a strong finish after generating $7.845 billion in net income attributable to shareholders, up from $2.118 billion in 2021. Moreover, Pioneer Natural Resources Company (NYSE:PXD) generated $8.4 billion in cash flow and returned $8 billion of it to shareholders through dividends and buybacks.
6. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 56
Chevron Corporation (NYSE:CVX) is an American integrated oil and gas company headquartered in California, USA. The company is one of Warren Buffet’s favorite stocks and also one of the most profitable companies in the last 20 years. In the fourth quarter of 2022, Berkshire Hathaway held 162,975,771 shares of Chevron Corporation (NYSE:CVX)’s, totaling over $29.25 billion, making it the hedge fund with the highest stake in the company.
Chevron Corporation (NYSE:CVX) is capital returns heaven for investors as it has been increasing its dividends for the last 37 years. In the last 13 years alone, the company has increased its dividend by over 120%. Furthermore, the company also spends a significant amount of its cash flow on share buybacks. On February 28, Chevron Corporation (NYSE:CVX) increased its per annum share repurchase outlook to $10-$20 billion and announced a $75 billion share buyback authorization after announcing its Q4 quarterly earnings on January 25.
On March 10, Mizuho analyst Nitin Kumar maintained a Neutral rating on Chevron Corporation (NYSE:CVX)’s shares and raised his price target to $206 from $200.
Chevron Corporation (NYSE:CVX) is one of the best crude oil stock along with some other notable names, such as Exxon Mobil Corporation (NYSE:XOM), Occidental Petroleum Corporation (NYSE:OXY), and Schlumberger Limited (NYSE:SLB).
Carillon Tower Advisers made the following comment about Chevron Corporation (NYSE:CVX) in its Q4 2022 investor letter:
“Energy performed well during the fourth quarter, with the sector up about 23%. Investors returned to the sector after the Organization of the Petroleum Exporting Countries (OPEC) signaled it would reduce production. Chevron Corporation (NYSE:CVX) reported strong quarterly results while buying back stock, paying a healthy dividend, and maintaining a strong balance sheet.”
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Disclosure: None. 11 Best Crude Oil Stocks To Buy As Tensions Rise is originally published on Insider Monkey.
