- While recessionary forces have substantially affected the equities market, oil stocks to buy now are doing quite well.
- Chevron (CVX): One of the big oil giants, Chevron’s comprehensive exposure to the hydrocarbon energy industry makes it a no-brainer among oil stocks to buy now.
- ConocoPhillips (COP): Billed as Alaska’s largest crude oil producer, COP has become one of the most relevant oil stocks both fundamentally and politically.
- Marathon Oil (MRO): An independent energy firm focusing on exploration and production, MRO is one of the oil stocks that has risen from the dead.
- Williams Companies (WMB): Specializing in the midstream infrastructure arena, Williams’ interstate gas pipeline spans the continental U.S., making it extraordinarily pertinent.
- Western Midstream Partners (WES): Another midstream specialist, WES stands out among oil stocks to buy now for its massive dividend yield.
- Phillips 66 (PSX): Featuring a robust downstream portfolio, Phillips 66 is among the oil stocks to benefit from a gradual return to normal.
- PetroChina Company (PTR): One of the very few Chinese stocks to consider as speculation, PTR might make sense for gamblers.
Just what is going on with oil stocks? At the onset of the coronavirus pandemic, the broader energy industry suffered catastrophic losses in revenue as the novel coronavirus sent people scrambling for cover — quite literally. Naturally, the gradual return to normal saw the segment rise in valuation due to heightened demand. Still, price dynamics have been chaotic because of the disruption to the industry’s typical ebb and flow.
The next big factor for high energy costs — specifically the pain at the pump — is Russia’s invasion of Ukraine. To be clear, prices were rising well before this conflict. However, the move both disrupted the modern global order and it shelved a significant portion of international oil inventory. And based on the tried-and-true principles of supply and demand, oil stocks had nowhere to go but up.
Finally, we have a demand component to consider as well. A significant catalyst for the initial pandemic-fueled slump in oil stocks was the sudden erosion of vehicle miles traveled. But now that this metric has been soaring higher — with many companies removing work-from-home privileges as Covid-19 fears fade — the energy market is likely to rebound with ferocity. And that could mean good things for these oil stocks to buy.
|WES||Western Midstream Partners||$26.55|
Oil Stocks to Buy: Chevron (CVX)
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While I’m not going to steer the direction of this list of oil stocks into an aggressively political realm, it’s undeniable that the hydrocarbon fuels industry has a reputational problem. On paper, such a circumstance would not be favorable for big oil firms like Chevron (NYSE:CVX). But like it or not, circumstances have changed, making CVX one of the no-brainer oil stocks to buy now.
For one thing, the company enjoys comprehensive exposure to every facet of the oil and natural gas segment. Once belonging to an increasingly unpalatable political profile, demand for Chevron has spiked — to the tune of a 48% gain year-to-date (YTD) for CVX stock. With gasoline prices skyrocketing, Americans and other consumers across the world are looking for relief. In turn, Chevron could help play an important role in resolving this pain.
Yes, that’s going to hurt environmental, social and governance (ESG) initiatives that were previously all the rage. However, studies imply that when you hit consumers in the wallet, willingness to support sustainable initiatives fades away.
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If you want to dive further into the complex politics of oil stocks, you should check out ConocoPhillips (NYSE:COP). As Alaska’s largest crude oil producer, ConocoPhillips commands extraordinary relevance. With Alaska — nicknamed The Last Frontier — providing enormous commodities-based riches for the U.S., COP is a major component of our country’s energy security and independence.
Of course, with environmentalism becoming a substantial concern due to the well-documented threats of climate change, Alaska is caught in a tug of war between pro-green initiatives and the need for energy resilience. Though it’s a bit of speculation, the current backdrop suggests that investors should consider COP as one of the best oil stocks to buy now.
As every news outlet of import has reported, President Joe Biden’s approval rating has plunged to near record lows amid inflation fears. Those inflation fears obviously include gas prices, which is stifling average household budgets. And just recently, it was announced that the Biden administration canceled “one of the most high-profile oil and gas lease opportunities.” Therefore, COP stock is likely to win out simply because of the economic weight.
Oil Stocks to Buy: Marathon Oil (MRO)
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While focusing on the majors when it comes to oil stocks is probably the safest approach, adventurous investors may want to branch out to the independent names like Marathon Oil (NYSE:MRO). Focusing on the exploration and production side of the business, Marathon has become sort of a religious figure in the energy market. Back during the spring doldrums of 2020, MRO stock seemed all but dead.
After months of uncertainty following Covid-19’s intrusion into our borders, though, MRO stock took off like a rocket. In fact, between Sept. 21, 2020 through the close of market on Tuesday, the price of MRO stock increased by 486%, reflecting a complete paradigm shift in terms of business viability. Given that vehicular traffic volume has essentially returned to pre-pandemic norms, Marathon has a very positive outlook.
Admittedly, critics may point out that traffic could die down due to the stifling cost of gas. However, I think it’s very possible that working from home is over. More than one major company has disclosed productivity losses, meaning playtime is over. Naturally, this setup cynically bolsters oil stocks to buy.
Williams Companies (WMB)
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We can talk all day about the upstream side of the energy industry or the segments that are focused on extracting hydrocarbons for eventual processing and distribution. Arguably, it’s the sexiest component of oil stocks. However, societies can’t survive without midstream operators, the behind-the-scenes entities that largely focus on the storage, processing and transportation of petroleum products.
One of the best no-brainer oil stocks to buy now in my opinion is Williams Companies (NYSE:WMB). One of the most important midstream infrastructure operators, Williams’ interstate gas pipeline extends from coast to coast, thereby making WMB indispensable. In business as in war, logistics is everything. Getting critical products to where they’re needed the most is what Williams does on a daily basis.
Given its status in the broader energy scheme, it’s no surprise that WMB stock is up nearly 38% YTD. Should society continue its normalization trek, there’s little reason to doubt that WMB stock can rise higher still.
Oil Stocks to Buy: Western Midstream Partners (WES)
As the name suggests, Western Midstream Partners (NYSE:WES) is another significant player in the midstream energy game. According to its website, Western Midstream specializes in the “gathering, compressing, treating, processing, and transporting natural gas; gathering, stabilizing, and transporting condensate, NGLs [natural gas liquids], and crude oil; and gathering and disposing of produced water.”
Furthermore, the company’s core assets are located in Delaware Basin in West Texas and New Mexico and the DJ Basin in northeastern Colorado, two of the most active and productive basins in the country. If for whatever reason the impressive footprint wasn’t enough to have you eyeballing WES stock, then its staggering dividend yield of 8% might help change your mind.
With inflation taking a bite out of purchasing power, a 7.6% dividend yield can help mitigate the monetary pain. Still, I’d be remiss to not point out that Western Midstream is structured as a limited partnership, which means that stakeholders of WES will need to file a Schedule K-1.
Phillips 66 (PSX)
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Making its debut as an independent energy firm following ConocoPhillips’s decision to spin off its downstream and midstream assets, Phillips 66 (NYSE:PSX) is looking very enticing as one of the oil stocks to buy now. While it offers many avenues for investors to be excited about, I’m particularly enthused about its marketing aspect.
For one thing, Phillips 66 leverages several popular brands, including 76 Gas and Red Line Oil. As drivers hit the road either for vacationing purposes or because they were recalled to the office, the downstream segment of PSX should enjoy robust demand. Of course, a higher traffic volume will also translate to greater maintenance requests, which again benefits Phillips 66.
Second, the company markets aviation fuel, which should likewise enjoy a cynical demand surge. With society gradually returning to normal, transportation methods across the board should see increased utilization. As well, people want to regain lost social experiences, meaning that they may take the vacations that they’ve been putting off for so long.
Oil Stocks to Buy: PetroChina Company (PTR)
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Finally, I’m going to end on a very speculative note with PetroChina Company (NYSE:PTR), an oil and gas company headquartered in Beijing. As Asia’s largest oil and gas producer, PTR carries significant clout. However, the company has a bit of a problem. It’s exposed to China — obviously — and that is problematic due to economic, governmental and geopolitical risks.
Moreover, the Russian invasion of Ukraine puts China — and specifically, its oil stocks — in an awkward position. While Russia is a country blessed with natural resources, the acumen and technologies needed to extract those resources have come from western companies. Well, the sanctions imposed on Moscow makes its oil sector much less viable than before the military conflict. Invariably, that hurts PetroChina.
Under this context, it’s not surprising that PTR stock is up only 9% YTD whereas other oil stocks are easily pulling in double digits. However, that PTR hasn’t jumped so much might be attractive for value-seeking gamblers.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.