Fuel stocks, often referred to as energy stocks, represent shares of companies involved in the exploration and development of oil and gas reserves, as well as those specializing in drilling for these resources. Additionally, companies that refine crude oil into usable products, such as gasoline and diesel, also fall under this category.
The Global Energy Landscape
In an interview with Bloomberg on December 5, Amrita Sen, Founder and Director of Research at Energy Aspects, discussed the current state of the oil market and the upcoming OPEC+ meeting. Sen noted that OPEC+ members are unlikely to increase production, given the traditional maintenance season in Q1 and Q2, which typically leads to crude stock builds. Instead, she expects the group to delay the planned output to effectively get rid of the seasonal builds and reassess the market in the second half of the year.
Sen highlighted that the current state of global inventories is incredibly low and that in the US, inventories are expected to end the year below 420 million barrels, which is at their lowest since 2007. Despite this, oil prices have been stuck at a low price, as analysts and industries are expecting a bearish 2025 and are discounting their current inventories
When asked about the risk of a serious breakdown in OPEC+ members, Sen said that it is unlikely to happen as the members are committed to maintain a stable price, rather than engaging in a price war. She recalled the price war in April 2020, which led to a decline in prices, and said that OPEC ministers want to avoid a repeat of that scenario. While they do want prices to be higher, they also realize that if there is a breakdown and the market is not managed properly, prices can also go lower.
Read Also: 10 Oil Stocks with Biggest Upside Potential According to Analysts and 7 Best Emerging Markets Stocks To Buy Now.
Sen agreed that the recent commencement of Canadian oil shipments to international markets via the Trans Mountain pipeline represents a significant development in the industry and has enabled Canadian producers to benefit from increased access to global markets. Sen notes that China has a strong preference for Canadian heavy oil, primarily due to its consistent quality, which is well-suited to the requirements of modern Chinese refineries. Sen also said that all the new refineries coming online in China, India, and other South Asian countries are primarily designed to process medium or heavy sour crude oil, and its demand is projected to reach a net 800,000 barrels per day.
Sen pointed out that the refining capacity in regions such as Europe, North America, and other OECD countries is expected to decline, with a projected loss of 1 million barrels per day during the next year, comprising 400,000 barrels in Europe and an additional 400,000 in the United States, due to environmental concerns. Looking ahead to 2025, Sen expects the average oil price to average around $80 for Brent, but there are risks skewed to the upside due to the possible tightening of sanctions on Iran, Venezuela, and Russia under the Trump administration.
Energy plays a crucial role in the global economy, as it provides the essential resources needed to power industries, transportation, and homes. The oil and gas industry continues to play a pivotal role in meeting the world’s energy needs, even as the push for cleaner alternatives gains momentum. With that in context, let’s take a look at the 8 best fuel stocks to buy now.
A close up of a tanker truck transporting crude oil, natural gas liquids, and natural gas.
Our Methodology
To compile our list of the 8 best fuel stocks to buy now, we used Finviz and Yahoo stock screeners to find the 25 largest companies in the oil and gas sectors. We then used Insider Monkey’s Hedge Fund database to rank 8 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
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).
8 Best Fuel Stocks To Buy Now
8. Diamondback Energy, Inc. (NASDAQ:FANG)
Number of Hedge Fund Holders: 49
Diamondback Energy, Inc. (NASDAQ:FANG) is a Texas-based independent oil and gas company and a leading player in the Permian Basin, focusing on crude oil exploration and production. The company primarily supplies oil to domestic refineries and energy distributors.
Following the completion of its $26 billion merger deal with Endeavor Energy on September 10, Diamondback Energy, Inc. (NASDAQ:FANG) is in the process of integrating Endeavor Energy. This integration involves combining the teams, sharing best practices, and leveraging the strengths of both companies. The company is expected to benefit from this integration by improving drilling speeds, lowering drilling costs, and enhancing completion designs. The integration is expected to drive significant synergies and cost savings. Diamondback Energy, Inc. (NASDAQ:FANG) has also implemented various initiatives to improve its drilling and completion operations, including the use of clear fluids and electric hydraulic fracturing.
In Q3 2024, Diamondback Energy, Inc. (NASDAQ:FANG) reported a 13% revenue increase, driven by higher production volumes, which were boosted by the completion of the Endeavor merger, as well as an uptick in purchased oil sales. The company’s natural gas, oil, and natural gas liquids sales grew by 3% year-over-year.
7. Valero Energy Corporation (NYSE:VLO)
Number of Hedge Fund Holders: 49
Valero Energy Corporation (NYSE:VLO) is among the largest independent refiners in the United States, operating 15 refineries across the U.S., Canada, and the U.K. with a combined daily throughput capacity of 3.2 million barrels. The company also operates 12 ethanol plants with a total capacity of 1.6 billion gallons annually.
Valero Energy Corporation (NYSE:VLO) is investing in its low-carbon fuels business and has recently completed the Diamond Green Diesel Sustainable Aviation Fuel (SAF) project in a joint venture with Darling Ingredients. On November 16, the company delivered its first shipment of SAF. This project is a significant step forward for Valero Energy Corporation’s (NYSE:VLO) low-carbon fuels business, and the company is optimistic about its potential to drive growth and reduce carbon emissions. Valero Energy Corporation’s (NYSE:VLO) investment in the Diamond Green Diesel SAF project is also a key part of its efforts to diversify its business and reduce its dependence on traditional refining operations. The company is committed to growing its low-carbon fuels business and is exploring other opportunities to expand its presence in this market.
Valero Energy Corporation’s (NYSE:VLO) 2024 capital investment plan, in which the company allocated approximately $2 billion, is designated for growth projects, primarily focusing on low-carbon fuels and refining initiatives. The renewable diesel segment, which focuses on low-carbon fuels, is a key driver of future growth for Valero Energy Corporation (NYSE:VLO). Sales volumes in this segment increased by 552,000 gallons per day in Q3 compared to the same period in the previous year.
6. Cheniere Energy, Inc. (NYSE:LNG)
Number of Hedge Fund Holder2: 66
Cheniere Energy, Inc. (NYSE:LNG) is the largest exporter of liquefied natural gas (LNG) in the United States. The company’s Sabine Pass and Corpus Christi facilities serve as vital export terminals, playing a critical role in meeting the growing global demand for cleaner energy solutions. Cheniere Energy, Inc. (NYSE:LNG) also owns over 21 miles of natural gas supply pipeline that connects the Corpus Christi LNG Terminal with several intrastate and interstate natural gas pipelines.
Cheniere Energy, Inc. (NYSE:LNG) is investing heavily in its expansion projects to increase its liquefied natural gas (LNG) production capacity and maintain its position as a leading player in the global LNG market. One of the company’s most significant growth initiatives is the Corpus Christi Stage 3 expansion project, which was 68% complete at the end of the third quarter, and ahead of schedule. This project will add significant new capacity to the company’s existing Corpus Christi terminal, allowing the company to capitalize on the growing demand for LNG from markets in Asia and Europe.
McKinsey projects a 10% to 15% increase in global demand for natural gas, while the Gas Exporting Countries Forum (GECF) anticipates that LNG trade will surpass long-distance pipeline trade by 2026 and more than double by 2050, reaching 805 million tonnes, or 64% of traded gas. Cheniere Energy, Inc. (NYSE:LNG) owns two of the three largest LNG terminals in the U.S., which provide the company with a strong competitive edge. Additionally, Cheniere Energy, Inc. (NYSE:LNG) remains focused on reducing its debt, expanding production capacity, and delivering returns to shareholders. The company plans to repurchase shares and has authorized an additional $4 billion in share repurchases through 2027.
5. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 63
Chevron Corporation (NYSE:CVX) is a global energy leader engaged in exploration, production, and refining. Producing 3.1 million barrels of oil and 7.7 million cubic feet of natural gas per day, the company operates extensively across Europe, Africa, Asia, Australia, South America, and North America. The company has a capacity to refine 1.8 million barrels of oil daily at its refineries in the United States and Asia.
Chevron Corporation (NYSE:CVX) is taking several steps to drive growth and increase production. In the Gulf of Mexico, the company has started up the high-pressure Anchor project and began water injection to boost production at the Jack/St. Malo and Tahiti fields. These projects, combined with additional start-ups through 2025, are expected to grow Gulf of Mexico production to 300,000 barrels per day by 2026.
Chevron Corporation (NYSE:CVX) is also investing in new projects and technologies to drive growth. The company has initiated final lead testing for the wet sour gas compressors at its Tengiz project and is preparing the crude processing systems for operations. The Tengiz project is expected to be a major contributor to the company’s production growth, and the management is confident in its ability to deliver the project on time and on budget.
4. Schlumberger Limited (NYSE:SLB)
Number of Hedge Fund Holders: 65
Schlumberger Limited (NYSE:SLB) is the world’s largest oilfield services company, delivering advanced technology and expertise to oil and gas operators worldwide. The company plays a crucial role in the industry by providing drilling, exploration, and production solutions to major clients, including ExxonMobil and Chevron.
Schlumberger Limited (NYSE:SLB) is collaborating with next-generation companies to scale up technologies and make them accessible to its network of clients and customers. The company is partnering with ILiAD to scale up direct lithium extraction (DLE) technology. This technology has a significantly smaller physical footprint, reduced carbon emissions, and lower water usage compared to traditional lithium extraction methods.
In Q3, Schlumberger Limited (NYSE:SLB) reported a 10% year-over-year revenue increase, reaching $9.16 billion. This growth was driven by a 31% year-over-year revenue surge in its Production Systems segment to $3.1 billion and an 11% year-over-year rise in digital and integration revenue, fueled by the adoption of AI-powered tools and digital solutions. Regional growth was led by Europe & Africa and the Middle East & Asia, both recording 16% year-over-year revenue increases, while North America experienced modest growth of 3% year-over-year.
3. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 66
ConocoPhillips (NYSE:COP) is an independent exploration and production company that sells natural gas, crude oil, bitumen, liquefied natural gas, and natural gas liquids. The company specializes in unconventional oil production from U.S. shale formations and traditional reservoirs globally. ConocoPhillips (NYSE:COP) serves refineries, industrial clients, and global markets with its crude oil supply.
ConocoPhillips (NYSE:COP) is driving growth through a combination of strategic acquisitions and operational expansion. On November 22, the company completed its acquisition of Marathon Oil Corporation and expects to achieve synergies exceeding $1 billion on a run-rate basis within the next 12 months. The deal valued at $22.5 billion, has added 2 billion barrels of resources to its portfolio and is expected to significantly boost production in the Permian Basin.
This acquisition has also enabled the company to increase its production outlook for FY 2024. In addition to the Marathon Oil acquisition, ConocoPhillips (NYSE:COP) is also focusing on growing its operational footprint in other key shale plays, such as the Bakken. The company is investing in new projects and technologies to enhance its drilling and production capabilities, which is expected to drive further growth in its production volumes.
2. Occidental Petroleum Corporation (NYSE:OXY)
Number of Hedge Fund Holders: 71
Occidental Petroleum Corporation (NYSE:OXY) is a global energy company engaged in crude oil exploration, production, and marketing. The company maintains a significant presence in the U.S., the Middle East, and Latin America, serving as a key supplier of crude oil to refineries and industrial sectors.
Occidental Petroleum Corporation (NYSE:OXY) is focusing on utilizing its existing infrastructure in the Delaware basin acreage to develop secondary benches inside the existing wells by leveraging technology. By doing so, the company aims to replace reserves at a low cost. Additionally, the company is reducing costs through infill development and has been able to add considerable reserves through extensions and discoveries. As a result, Occidental Petroleum Corporation (NYSE:OXY) is replacing reserves while investing less than its current depreciation and depletion costs.
Occidental Petroleum Corporation (NYSE:OXY) plans to maintain a five-rig program within its CrownRock assets through 2025, targeting mid-single-digit production growth. The company is also focused on retaining flexibility in capital expenditures across its broader U.S. onshore portfolio to respond to shifts in commodity prices. With the integration of CrownRock assets and strong performance from new wells in the Permian Basin, Occidental Petroleum Corporation (NYSE:OXY) anticipates achieving a production level of 1.45 million barrels of oil equivalent per day in Q4.
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 86
Exxon Mobil Corporation (NYSE:XOM) is among the largest publicly traded international energy and petrochemical companies worldwide. The company delivers energy solutions across various sectors, including transportation, manufacturing, energy production, and consumer markets. Its diverse product portfolio features crude oil, natural gas, refined fuels, motor oils, industrial lubricants, and a wide array of petrochemicals such as olefins, aromatics, and ethylene glycol.
Exxon Mobil Corporation (NYSE:XOM) is expanding its liquefied natural gas (LNG) business, with several projects in development, including the Golden Pass venture, which is expected to come online in 2025, and the North Field Expansion in Qatar, and the Papua and Mozambique projects. Additionally, the company is expanding its Product Solutions business, with investments in strategic projects such as the Beaumont expansion and Permian Crude Ventures.
In response to Europe’s transition away from Russian energy resources, Exxon Mobil Corporation (NYSE:XOM) is seizing new opportunities in the region. On November 21, Reuters reported that Exxon Mobil Corporation (NYSE:XOM) plans to commence drilling a well off the coast of Cyprus in January 2025, as part of its ongoing efforts to explore natural gas in the area. The upcoming drilling operation will focus on two wells, Pegasus and Electra, with Electra showing great potential, although additional appraisal drilling will be necessary to determine its feasibility.
While we acknowledge the potential of Exxon Mobil Corporation (NYSE:XOM) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than XOM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure. None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
