We recently published a list of the 8 Most Profitable Oil Stocks To Invest In. In this article, we are going to take a look at why Canadian Natural Resources (NYSE:CNQ) is one of the best oil stocks to invest in.
OPEC Anticipated to Hold Oil Supply
One of the leading oil-producing regions, OPEC countries and its allies are expected to extend their latest round of oil production cuts for the first quarter of 2025, according to analysts. OPEC+ controls nearly half of the world’s oil production and supply. The oil governing body was planning to initiate unwinding output cuts through 2025. However, the decline in global demand and output outside OPEC could impact oil prices.
“Market participants are closely watching to see if OPEC+ will focus on bolstering prices by extending production cuts, or opt to defend its share of the global crude oil market by easing those cuts,” said Satoru Yoshida, commodity analyst with Rakuten Securities. Yoshida added that the OPEC decision to cut oil supply would potentially have a short-term impact. Still, the market is anticipated to rise by the year-end following the takeover of the Trump administration.
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The OPEC+ countries are holding around 5.86 million barrels per day of output, which accounts for almost 5.7% of global demand. To support the oil market, the oil supply has been managed in a series of steps agreed since 2022. The OPEC members had planned an output increase of 180,000 barrels per day for January 2025. The non-OPEC+ countries are expected to boost the oil supply by almost 1.5 million barrels per day in 2025. Nevertheless, the global oil benchmark Brent Crude has mostly traded between $70 to $80 per barrel in 2024, while it hit a 2024 low below $69 in September.
The global oil market is impacted by several factors including, geopolitical risks, production levels, and OPEC’s strategies. The ceasefire between Israel and Hezbollah could affect prices, but the new war in Syria could potentially be a new issue for oil producers. However, oil prices remain lower than expected based on inventory fundamentals. In the long term, oil price hikes above $100 are less likely to occur due to the impact of U.S. shale production over the past decade.
With that, let’s take a look at where Canadian Natural Resources (NYSE:CNQ) ranks among the most profitable oil stocks to invest in.
An expansive oil refinery beneath a night sky, illuminated by artificial lights.
Our Methodology
To compile our list of the 8 most profitable oil stocks to invest in, we scanned oil stocks through Finviz Screener using two indicators. We shortlisted the stocks with a minimum net income of $2.5 billion or more in the trailing twelve months (TTM) and a 5-year net income compound annual growth rate (CAGR) of over 10%. From that list, we narrowed our choices to the 8 stocks widely held by hedge funds, as of Q3 2024. As of the third quarter, the list is ranked 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).
Canadian Natural Resources Limited (NYSE:CNQ)
Number of Hedge Funds Holders: 48
5-Year Net Income CAGR: 13.44%
TTM Net Income: $7.59 Billion
Canadian Natural Resources (NYSE:CNQ) is one of the largest independent crude oil and natural gas producers based out of Canada. The company operates through exploration and production, oil sands mining and upgrading, and midstream and refining. The company has a diverse portfolio of assets which includes major operations in Western Canada, the United Kingdom, the North Sea, offshore Africa, and various other international locations.
Canadian Natural Resources (NYSE:CNQ) has a long-life, low-decline asset portfolio which offers greater flexibility and resilience than conventional exploration and production companies. The company’s oil sands assets require minimum reinvestment to sustain output, allowing CNQ to save capital and generate more free cash flow.
Similar to Suncor Energy, CNQ has tapped into new assets in Alberta, which is one of the richest oil and gas regions in the world. The company has acquired Chevron’s 70% operator working interest in light crude oil and liquid-rich assets in the Duvernay play in Alberta. Furthermore, the company has announced that it has signed an agreement to acquire a 20% interest in the Athabasca Oil Sands Project (AOSP) from Chevron Canada Limited. This acquisition will potentially increase CNQ’s per day synthetic crude oil production by 62,500 barrels. In another deal with Chevron, the company expects to add 60,000 barrels of oil equivalent per day to its production in 2025.
Overall, CNQ ranks 6th on our list of the most profitable oil stocks to invest in. While we acknowledge the potential of CNQ as an investment, our conviction lies in the belief that some 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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Disclosure: None. This article is originally published at Insider Monkey.
