5 Oil Stocks Citi Likes

Citi held its 2015 Global Energy Conference this week and highlighted five Buy-rated stocks it likes in the current environment.

Analysts led by Alastair R Syme noted that rising volatility reflected “growing uncertainty around positioning in the sector, driven we think by the interplay between the bounce in oil prices against the continued signs of a downward shift in the long-term supply-curve.” The analysts believed “the latter will win out.”

Syme indicated that 40 percent of the industry’s current and future investment plans would be “sub-economic” with Brent oil prices below $75/bbl.

Further, it did not seem clear that a sense of urgency had emerged “around players with uncompetitive asset positions,” according to Syme.

As a result, for Big Oil, “self-help needs to be a centrepiece of a new reality,” Syme wrote, and the “most aggressive self-help stories” looked to be Total SA (ADR) (NYSE: TOT) and ConocoPhillips (NYSE: COP).

The analysts thought the two companies offered “an alignment of business strategy to the interests of shareholders.”

The firm maintained a local price target on Total SA of $52 and an $80 price target on ConocoPhillips.

Looking to the refining industry, Syme noted that while it seemed “unsure of exactly why current profitability is so strong, the structural advantage driven by shale growth remains an underlying theme.”

For U.S. refiners, the companies that appeared “focused on the optimal way to return capital back to shareholders” were Valero Energy Corporation (NYSE: VLO), Marathon Petroleum Corp (NYSE: MPC) and Phillips 66 (NYSE: PSX).

The firm maintained a $67 price target on Valero, $119 target on Marathon and $88 price target on Phillips 66.