We recently published a list of 10 Oil Stocks with Biggest Upside Potential According to Analysts. In this article, we are going to take a look at where Schlumberger Limited (NYSE:SLB) stands against the other oil stocks with biggest upside potential.
In an interview with CNBC on November 26, Daan Struyven, Co-Head of Global Commodities Research at Goldman Sachs, discussed the current state of the oil market and the potential impact of a ceasefire in the Middle East on oil prices.
Struyven noted that while the geopolitical risk premium in oil prices was fairly modest, he thinks that the market is focused on risks with a clear path to lower production. The market has not yet fully priced into this possibility, and the current price of oil is too low compared to inventory fundamentals.
Struyven pointed out that global oil inventories have edged down this year, and the market has been in a deficit of around 0.5% of global markets. He thinks that many oil investors are pricing in a large surplus for 2025, which Struyven believes is not done yet and he sees significant upside risk to prices in the short term, potentially coming from lower production from Iran.
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Struyven noted that while the Trump administration’s goals are achievable, they are largely driven by technological advancements and LNG export plans that are already underway despite any policy change. He also agreed that the big oil companies are not eager to spend more money on production on current oil prices.
Struyven also highlighted OPEC’s influence on the market, emphasizing Saudi Arabia’s preference for higher oil prices. He suggested that OPEC would likely defend a price floor of around $70 per barrel but would not hesitate to increase supply if prices climb above $80. This aligns with his expectation that oil prices will remain within a range of $70 to $85 per barrel.
Finally, Struyven attributed the changes in the oil market to the success of US shale production, which has accounted for 100% of global oil production growth over the past decade. This has put downward pressure on long-term prices, making it less likely for oil prices to spike above $100 as they did in the past.
The oil market is influenced by a range of factors, including geopolitical risks, production levels, and OPEC’s strategies. The potential for a ceasefire in the Middle East, for example, could impact prices, but the geopolitical risk premium is still relatively modest. Despite this, oil prices remain lower than expected based on inventory fundamentals. While these dynamics shape the near-term outlook, long-term oil price increases above $100 are less likely due to the impact of US shale production, which has accounted for all global oil production growth over the past decade.
An aerial view of a well site, depicting the scale of oil and gas operations.
Our Methodology
For this article, we sifted through Energy ETFs and online rankings to form an initial list of 35 Oil stocks. We then sourced the analysts’ average price targets and picked the 10 stocks that had the highest upside potential, as of November 29. We also included their hedge fund sentiment, which was taken from Insider Monkey’s Hedge Fund database of 900 elite hedge funds as of Q3 of 2024. The list is sorted in ascending order of analysts’ average upside potential.
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).
Schlumberger Limited (NYSE:SLB)
Upside Potential: 31.04%
Number of Hedge Fund Holders: 65
Schlumberger Limited (NYSE:SLB) is the world’s largest oilfield services company. The company delivers cutting-edge technology and expertise to oil and gas operators worldwide. It plays a critical role in the crude oil industry, offering drilling, exploration, and production solutions to major clients, including ExxonMobil and Chevron.
On November 12, Schlumberger Limited (NYSE:SLB) introduced Stream, a high-speed intelligent telemetry system designed to enhance drilling performance and reliability in complex wells. Stream integrates proprietary artificial intelligence (AI) algorithms with SLB’s TruLink definitive dynamic survey-while-drilling service.
The introduction of Stream represents a significant advancement in drilling technology. By combining AI and advanced telemetry, Stream empowers operators to drill complex wells with greater precision and confidence, enabling more informed decision-making and improved outcomes.
In the third quarter, Schlumberger Limited (NYSE:SLB) posted a 10% year-over-year revenue increase, reaching $9.16 billion. This growth was driven by a 31% year-over-year surge in revenue from its Production Systems segment to $3.1 billion and an 11% year-over-year rise in digital and integration revenue, supported by the adoption of AI-driven tools and digital solutions. Regional growth was led by Europe & Africa and the Middle East & Asia, each recording a 16% year-over-year increase, while North America experienced a more modest 3% growth.
Schlumberger Limited (NYSE:SLB) is committed to improving crude oil extraction efficiency while minimizing environmental impacts. The company continues to expand its service offerings and leverage digital technologies to optimize resource management. Recently, Schlumberger Limited (NYSE:SLB) has strengthened its digital portfolio by launching the Lumi AI platform and forming strategic partnerships with NVIDIA, AWS, and Aramco.
Overall, SLB ranks 5th on our list of oil stocks with biggest upside potential according to analysts. While we acknowledge the potential of SLB 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 SLB 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.
