Oil Price Predictions for 2022 and 10 Stocks to Watch

Published on March 14, 2022 at 9:04 am by Hamna Asim in Hedge Funds, News

In this article, we discuss oil predictions for 2022 and 10 stocks to watch. If you want to skip our comprehensive analysis of the oil industry, go directly to Oil Price Predictions for 2022 and 5 Stocks to Watch.

Russia’s invasion of Ukraine in late February caused turmoil in stock markets globally, but the energy sector was among the hardest hit. Economic sanctions by the West on Russia, the largest exporter of natural gas and the second largest provider of crude oil, caused oil prices to hit an all-time high, with the Brent crude futures hitting about $140 per barrel.

“Oil Prices Could Go Higher if Russian Oil Embargo Enacted”

John Kilduff, the founder of Again Capital, joined a CNBC program on March 9 to discuss oil prices. He stated that petrol and diesel prices are skyrocketing all over the United States, in addition to commodities becoming expensive, which will hit consumer confidence hard. According to Kilduff, oil prices can go up by roughly $30 per barrel if the Russian situation in Ukraine worsens or continues for much longer, and it is only a matter of time before oil supermajors move away from disciplined production and begin to actively cash in on the soaring prices. He predicted that oil prices could rise considerably if the Russian oil embargo is completely implemented, since the market cannot afford to lose imports of approximately 4.3 million Russian oil barrels a day.

Recession

On March 8, Tom Kloza from the Oil Price Information Service discussed Putin’s invasion of Ukraine and the ongoing impact on oil markets with CNBC’s ‘Closing Bell’, stating that this energy crisis is the most serious one the market has witnessed in a lifetime. He stated that Europe is in “desperate” need of Russian oil, but the US has significantly less dependence and an embargo could be on the horizon. However, he reiterated that demand for oil worldwide is not being met, and Russian oil cannot be replaced by other producers entirely. With the numbers seen in the market, Kloza believes that the economy might be heading towards a recession, since the same numbers were observed in 2008 as well.

“I don’t think this is a big enough oil shock to cause a recession”

Ethan Harris, the head of global economics research at BofA Securities, joined CNBC ‘The Exchange’ on March 9 to discuss whether the Fed will implement seven rate hikes and his outlook on the economy. Harris stated that oil shocks do not help the Fed, given that they hike inflation and weaken economic growth. He believes that the market is focused on economic growth entirely, and the bigger picture of raging inflation is not getting the attention it deserves. The Fed is not trying to hurt the economy with rate hikes, rather gradually normalize inflationary pressure. Harris stated that technically the economy should have been on the path to normalization already, if the rate hikes were implemented last fall.

While some people believe that a recession and demand destruction is the only solution to normalize the market, Harris entirely disagrees with this statement. He observed that middle and upper income households have enough savings to weather the higher prices, the US economy is running strong, and in his opinion, this oil shock is not big enough to cause a recession. He revisited the 2008 recession, stating that oil was just an add-on to the collapsing credit markets, financial markets, and the housing crisis. Oil did not instigate the recession then, and the market would have come out of the period with weaker growth and no recession had the other factors not been involved.

Some of the most notable oil companies to look out for amid market uncertainty and soaring crude oil prices include Occidental Petroleum Corporation (NYSE:OXY), Chevron Corporation (NYSE:CVX), and Exxon Mobil Corporation (NYSE:XOM), among others discussed in detail below.

Luis Louro / shutterstock.com

Our Methodology

We picked these oil stocks after a careful assessment of the oil market, selecting companies that are poised to benefit or lose from the current environment and the Ukraine war. We have mentioned analyst ratings, and data from 924 elite hedge funds tracked by Insider Monkey at the end of December 2021 was used to identify the number of hedge funds that hold stakes in each firm.

Oil Price Predictions for 2022 and Stocks to Watch

10. Laredo Petroleum, Inc. (NYSE:LPI)

Number of Hedge Fund Holders: 12

Laredo Petroleum, Inc. (NYSE:LPI) is an independent energy company engaged in the exploration and development of oil and natural gas properties in the Permian Basin of West Texas. The company was incorporated in 2006 and is headquartered in Tulsa, Oklahoma.

Laredo Petroleum, Inc. (NYSE:LPI) reported Q4 results on February 22, posting strong earnings, guiding the street to stable production, and allocating cash flow to the balance sheet. The company is forecasting $520 million of capital spending in 2022, versus $444 million in 2021, with the 18% increase being almost entirely attributable to service cost inflation.

According to the fourth quarter database of Insider Monkey, 12 hedge funds held long positions in Laredo Petroleum, Inc. (NYSE:LPI), compared to 14 funds in the quarter earlier. Maple Rock Capital is the largest shareholder of the company, with 644,718 shares worth $38.7 million.

In addition to Occidental Petroleum Corporation (NYSE:OXY), Chevron Corporation (NYSE:CVX), and Exxon Mobil Corporation (NYSE:XOM), Laredo Petroleum, Inc. (NYSE:LPI) is a notable oil stock to look out for in the current environment.

9. Delek US Holdings, Inc. (NYSE:DK)

Number of Hedge Fund Holders: 17

Delek US Holdings, Inc. (NYSE:DK) engages in the integrated downstream energy business in the United States. Headquartered in Brentwood, Tennessee, Delek US Holdings, Inc. (NYSE:DK) owns assets in petroleum refining and renewable fuels. Among the hedge funds tracked by Insider Monkey, 17 funds were bullish on Delek US Holdings, Inc. (NYSE:DK) in Q4 2021, up from 13 funds in the prior quarter.

Delek US Holdings, Inc. (NYSE:DK) completed a significant number of projects in 2021, and intends to invest close to $260 million in new stores and its Permian Gathering business in 2022.

On March 8, BofA analyst Doug Leggate upgraded Delek US Holdings, Inc. (NYSE:DK) to Neutral from Underperform with a price target of $21, up from $17. He sees U.S. refiners overlooked as net beneficiaries of structurally higher natural gas costs outside the U.S., given that natural gas is a critical input to the margin necessary for international refiners to clear higher costs.

8. Enterprise Products Partners L.P. (NYSE:EPD)

Number of Hedge Fund Holders: 21

Enterprise Products Partners L.P. (NYSE:EPD) is a Texas-based company that provides midstream energy services to producers and consumers of natural gas, natural gas liquids, crude oil, petrochemicals, and refined products.

On February 1, Enterprise Products Partners L.P. (NYSE:EPD) traded modestly higher after Q4 adjusted earnings missed estimates, while revenues surged far above expectations to $11.4 billion from $7 billion in 2020. Entering 2022, Enterprise Products Partners L.P. (NYSE:EPD) expects a continuation in the global economic recovery, and growth in crude oil, natural gas, and natural gas liquids production in the United States driven primarily by the Permian Basin and Haynesville shale.

Enterprise Products Partners L.P. (NYSE:EPD) has a well-diversified and top-class asset base servicing mostly fixed-fee contracts. As a result, it generates very stable and predictable cash flows to support the distribution to shareholders and reinvestment into the business at high rates of return.

A total of 21 hedge funds were bullish on Enterprise Products Partners L.P. (NYSE:EPD) at the end of December 2021, compared to 25 funds in the quarter earlier. First Eagle Investment Management is the biggest shareholder of the company, with more than 3 million shares worth $69 million.

Here is what ClearBridge Investments has to say about Enterprise Products Partners L.P. (NYSE:EPD) in its Q1 2021 investor letter:

“While reducing in health care and consumer staples, we increased our exposure to high-quality names in economically sensitive areas of the market. We added to low-cost, high-quality energy names (including) Enterprise Products Partners LP. We are positive on this company’s strong balance sheets, competitive positions and exposure to an economic recovery.”

7. Murphy Oil Corporation (NYSE:MUR)

Number of Hedge Fund Holders: 24

Murphy Oil Corporation (NYSE:MUR) is based in Houston, Texas, and operates as an oil and natural gas exploration and production company in the United States, Canada, and internationally.

On January 27, Murphy Oil Corporation (NYSE:MUR) declared a $0.15 per share quarterly dividend, a 20% increase from its prior dividend of $0.13. The dividend was paid on March 1, to shareholders of record on February 14.

The company posted a fourth quarter 2021 net income of $168.40 million, or $1.08 per diluted share, compared to a loss of $1.11 per share in Q4 2020. Murphy Oil Corporation (NYSE:MUR)’s revenues of $738.95 million were also better than expectations, up from the prior-year quarter of $330.21 million.

Mizuho analyst Vincent Lovaglio upgraded Murphy Oil Corporation (NYSE:MUR) on February 11 to Buy from Neutral with a price target of $42, up from $33, following the company’s Q4 results. The analyst says visibility on Gulf of Mexico project start-ups is driving production and cash flow higher in 2023 and 2024 on lower spend.

Among the hedge funds tracked by Insider Monkey, 24 funds reported owning stakes in Murphy Oil Corporation (NYSE:MUR), up 19 funds in the quarter earlier. Pzena Investment Management is the leading stakeholder of the company, with more than 2 million shares worth $53.5 million.

6. PDC Energy, Inc. (NASDAQ:PDCE)

Number of Hedge Fund Holders: 24

PDC Energy, Inc. (NASDAQ:PDCE) is a Colorado-based independent exploration and production company that supplies crude oil, natural gas, and natural gas liquids in the United States.

The Russia-Ukraine war provides ample opportunity for American oil production companies. PDC Energy, Inc. (NASDAQ:PDCE) recently acquired Colorado-based basin operator Great Western Petroleum LLC, further increasing its bottom line. PDC Energy, Inc. (NASDAQ:PDCE) has carried a very steady revenue since 2018. In 2021, that revenue took a big jump, a precursor for things to come.

BMO Capital analyst Phillip Jungwirth raised the price target on PDC Energy, Inc. (NASDAQ:PDCE) to $73 from $65 but kept a Market Perform rating on the shares. With its announced $1.3 billion deal for Great Western, PDC Energy, Inc. (NASDAQ:PDCE) is doubling down on the DJ Basin, though the analyst likes the deal owing to the compelling valuation that is highly accretive with minimal value implied for development potential.

The company published its fourth quarter results on February 28, posting earnings per share of $2.86, topping estimates by $0.34. Revenue over the period jumped 206.80% year-on-year to $854.64 million, outperforming estimates by $202.54 million.

In Q4 2021, 24 hedge funds in the database of Insider Monkey reported owning stakes in PDC Energy, Inc. (NASDAQ:PDCE), worth close to $266 million. Harris Associates is the biggest shareholder of the company, with 2.4 million shares worth $119.4 million.

PDC Energy, Inc. (NASDAQ:PDCE) stock is gaining traction amid the Russia-Ukraine war, just like Occidental Petroleum Corporation (NYSE:OXY), Chevron Corporation (NYSE:CVX), and Exxon Mobil Corporation (NYSE:XOM).

To see rest of the stocks in this list click Oil Price Predictions for 2022 and 5 Stocks to Watch.