Oil prices are ripping this year with crude up roughly 50% since the start of the year. A surge in oil prices is having a positive effect on the energy market but a negative one on the rest of the economy with consumers forced to spend more money on gas and less on other products.
The average gas price in the United States stands at $4 a gallon at the moment and close to $6 a gallon in California.
Crude and energy prices were on the rise prior to the war in Ukraine and are now increasing rapidly, affecting prices in nearly every other market. Some analysts are calling for $150 a barrel before the year-end in crude oil.
These projections come after crude oil prices came close to $130 a barrel in February. Given the extremely tight oil supply market, here we look at top oil stocks to buy amid surging energy prices.
Although shares of oil companies have already moved higher in an aggressive manner, analysts believe that there is more upside left given how tight the supply market is.
Chevron (NYSE: CVX) is a U.S. multinational energy corporation that manufactures and transports crude oil and natural gas but also engages in refining, marketing, and distributing fuel. Furthermore, the company also has chemical, mining, and power generation operations.
CVX is the second-largest U.S. company in the world, behind ExxonMobil. Chevron mostly operates on the west coast of North America, Southeast Asia, South Korea, Australia, and the U.S. Gulf Coast.
Chevron’s stock price is up nearly 40% YTD.
Exxon Mobil Corporation (NYSE: XOM) is the largest oil and gas company in the United States and the second-largest in the world. The company runs a range of operations including exploration and production of oil and gas, power generation, and also engages in coal and minerals operations.
The company is also involved in the production and marketing of lubricants, fuel, and chemicals. Its primary businesses include Exxon, Mobil, ExxonMobil Chemical, and Esso.
Exxon’s stock price is up roughly 32% YTD.
Pioneer Natural Resources Company (NYSE: PXD) is an independent US oil and gas exploration and production business, located in Irving, Texas. Pioneer is the largest acreage holder in Cline Shale, a popular oil play in Pennsylvania.
PXD’s stock price is trading about 35% higher YTD.
Phillips 66 (NYSE: PSX) is a downstream energy company that engages in the refining, marketing, and transportation of oil. Phillips 66 became an independent business when ConocoPhillips spun off its downstream and midstream assets, creating the largest independent oil exploration and production company, with roughly 14,000 employees around the world.
Phillips stock is up only 6% YTD, trading well below the all-time high set in 2018.
ConocoPhillips (NYSE: COP) is a Houston, Texas-headquartered oil and gas exploration and production company. The company has operations in Alaska, the Permian Basin, the Bakken Formation, the Gulf of Mexico, the Eagle Ford Group, and others. The bulk of production is based in Alaska.
COP’s stock is one of the biggest beneficiaries of rising oil prices so far as it trades more than 41% higher YTD.
Baker Hughes (NASDAQ: BKR) is an energy technology company and one of the largest oil field service providers in the world. The company develops products and services for oil drilling, formation evaluation, completion, and production of oil and gas. The 50-year old company has operations in more than 120 countries around the globe.
Baker Hughes merged with GE Oil and Gas in 2017 and divested from General Electric just two years later. Once a majority owner of the company, GE now holds just 30% of Baker Hughes and plans to completely divest its stake in the coming years.
BKR’s stock price trades 55% in the green YTD.
Schlumberger (NYSE: SLB) is an energy company known as the biggest offshore drilling business and offshore drilling contractor in the world, as well as a provider of a broad range of software, information management, and IT infrastructure services.
Schlumberger operates in more than 120 countries around the world.
SLB’s stock is trading around 37% higher YTD.
Bottom Line:
Oil stocks could be among the best investments of the year – but remember, investing in the oil industry is inherently risky.
Oil demand is generally determined by economic growth. Rising oil prices (and oil producer profitability) typically requires a robust economy. However, prices will not rise indefinitely. Geopolitics and capital allocation are also key for the industry.
Focusing on companies that can remain stable for the long-term is your best bet. Remember, risk management is vital for any oil industry investor.
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