We recently published a list of 8 Best Fuel Stocks To Buy Now. In this article, we are going to take a look at where Diamondback Energy, Inc. (NASDAQ:FANG) stands against other best fuel stocks to buy now.
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.
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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.
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).
A pipeline worker overseeing the flow of crude oil into storage tanks from an integrated water system.
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.
Overall, FANG ranks 8th on our list of best fuel stocks to buy now. While we acknowledge the potential of FANG 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 FANG 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.