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 TotalEnergies SE (NYSE:TTE) 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.
READ ALSO: 12 Best ADR Stocks To Invest In According to Analysts and Top 8 Stocks To Buy In 8 Different Sectors for the Next 3 Months.
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 industrial oil and gas plant, with stacks of pipes issuing steam into the sky.
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).
TotalEnergies SE (NYSE:TTE)
Upside Potential: 30.64%
Number of Hedge Fund Holders: 17
TotalEnergies SE (NYSE:TTE) is a French multinational energy corporation specializing in oil. TotalEnergies SE (NYSE:TTE) is among the world’s largest energy companies, catering to a wide spectrum of clients, including governments, industries, and individuals, through its integrated energy business that spans crude oil production, natural gas, petrochemicals, and renewables.
TotalEnergies SE’s (NYSE:TTE) hydrocarbons division, which constitutes a substantial portion of the company’s revenue, boasts a strong portfolio of upstream projects poised to drive growth in the years ahead. TotalEnergies SE (NYSE:TTE) has set an ambitious target to increase hydrocarbon production by 3% annually until 2030, supported by six major oil and gas initiatives sanctioned in 2024. Notably, the GranMorgu project in Suriname is a key contributor, with recoverable oil reserves estimated to exceed 750 million barrels.
TotalEnergies SE’s (NYSE:TTE) integrated LNG segment is also expected to bolster growth, highlighted by several medium-term sales agreements signed in Asia. For the nine months ending September 30, the company secured a total of 4 million tons of LNG contracts in the region. Beyond hydrocarbons, TotalEnergies SE (NYSE:TTE) is making substantial investments in renewable energy, aiming for 35% of its electricity generation to come from renewables by 2025.
Overall, TTE ranks 6th on our list of oil stocks with biggest upside potential according to analysts. While we acknowledge the potential of TTE 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 TTE 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.
