Exxon Mobil (NYSE:XOM)
One of the largest oil firms in the world, ExxonMobil is also an American icon, with its corporate heritage tied to John D. Rockefeller’s Standard Oil. Further, Exxon is levered to every component of the oil industry, ranging from oil exploration to distribution to the consumer. Because of its broad exposure, several funds include XOM stock in their portfolio.
The biggest knock against the giant has been relevance. Over the trailing 5 years, XOM stock is down over 31%. Nevertheless, the rebound attempt from the pandemic, along with a cruel lesson in energy diversity imposed by the Texas winter storm, may be giving second life to the oil stalwart.
Formerly known as ChevronTexaco Corporation, Chevron Corporation and its subsidiaries engage in the integrated energy and chemicals operations markets in the United States and internationally, operating in two segments: Upstream and Downstream. The Upstream segment is involved in the exploration, development, production and transportation of crude oil and natural gas, the liquefaction, transportation and regasification associated with liquefied natural gas, transportation of crude oil through pipelines and processing, transportation, storage and marketing of natural gas, including a gas-to-liquids plant. The Downstream segment refines crude oil into petroleum products, markets crude oil, refined products and lubricants, manufactures and markets renewable fuels, transports crude oil and refined products by pipeline, marine vessel, motor equipment and rail car. Plus, the firm manufactures and markets commodity petrochemicals, plastics for industrial uses and fuel and lubricant additives.
As one of the largest fuel distribution companies in the U.S., Sunoco is one of the top ideas to consider if you’re banking on an economic recovery (or at least a consumer-level recovery). That’s because stronger sentiment should encourage Americans to hit the road, which would have a directly positive impact on SUN stock.
Further, evidence indicates that people want to travel but also desire to do so safely. In December 2020, the Associated Press reported that tension is still high for commuters using public transportation. Cynically, though, this dynamic may favor SUN stock as consumers elect to use their personal vehicles for transportation.
EnLink Midstream (NYSE:ENLC)
Among the oil stocks under $10, EnLink Midstream — as the company name implies — is levered to the midstream component of the oil and gas industry. Fitting between upstream (exploration and production) and downstream (refinement into consumer-ready products), midstream refers to operations involving processing, storage and transportation.
Not surprisingly, during the worst of the pandemic, ENLC stock hemorrhaged badly on the charts as transportation volume dropped precipitously. However, as Americans gradually adapt to the new normal, that volume has picked up. This year, contrarian investors have jumped on ENLC in anticipation of a broader recovery.
California Resources (NYSE:CRC)
California Resources produces oil and natural gas in California. At the end of 2018, the company reported net proved reserves of 618 million barrels of oil equivalent. Net production averaged 132 thousand barrels of oil equivalent per day in 2018 at a ratio of 75% oil and natural gas liquids and 25% natural gas.
Royal Dutch Shell plc, commonly known as Shell, is an Anglo-Dutch multinational oil and gas exploration, refining and marketing corporation headquartered in the Hague, Netherlands. It is also incorporated in the UK as a public company. As one of the supermajors, it was the fifth-largest company in the world in 2020.
Targa Resources (NYSE:TRGP)
Targa Resources is a midstream firm that primarily operates gathering and processing assets with substantial positions in the Permian, Stack, Scoop, and Bakken plays. It has 840,000 barrels a day of gross fractionation capacity at Mont Belvieu and operates a liquefied petroleum gas export terminal. The Grand Prix natural gas liquids pipeline recently entered full service.
Hess is an independent oil and gas producer with key assets in the Bakken Shale, Guyana, the Gulf of Mexico, and Southeast Asia. At the end of 2021, the company reported net proved reserves of 1.3 billion barrels of oil equivalent. Net production averaged 315 thousand barrels of oil equivalent per day in 2021, at a ratio of 69% oil and natural gas liquids and 31% natural gas.
ConocoPhillips is a U.S.-based independent exploration and production firm. In 2021, it produced 1.0 million barrels per day of oil and natural gas liquids and 3.2 billion cubic feet per day of natural gas, primarily from Alaska and the Lower 48 in the United States and Norway in Europe and several countries in Asia-Pacific and the Middle East. Proven reserves at year-end 2021 were 6.1 billion barrels of oil equivalent.
Pioneer Natural Resources (NYSE:PXD)
Headquartered in Irving, Texas, Pioneer Natural Resources is an independent oil and gas exploration and production company focusing on the Permian Basin in Texas. At year-end 2021, Pioneer’s proven reserves were 2.2 billion barrels of oil equivalent with net production for the year of 612 mboe per day. Oil and natural gas liquids represented 68% of production.
In 2020, few investors would have dreamed that oil stocks would be where they are now. At the time, a mysterious virus was spreading rapidly throughout the world, inducing a panic-fueled selloff in global equity indices. Later, crude oil prices would drop below zero, an unprecedented calamity representing a gutting of demand. It's one reason learning about the best crude oil stocks is so important.
Fortunately, that fallout turned out to be a temporary blip. Over time, investors gradually increased their position in oil stocks as they anticipated an eventual return to normal. Now, fueled by the COVID-19 vaccine rollout, the fossil-fuel energy sector has become one of the best-performing market segments.
Quick Look at the Best Crude Oil Stocks:
- EnLink Midstream
- California Resources
- Royal Dutch Shell plc,
- Targa Resources
- Pioneer Natural Resources
Highlighted Crude Oil Stocks
Overview: Crude Oil Stocks
As you know, oil stocks represented the backbone of the transportation industry throughout the 20th century and going into the present one. Though electric vehicles (EVs) have a long and storied history, during their inception the limited technology could not overcome the energy density of fossil fuels like gasoline or diesel. Plus, petroleum is used for a wide range of products across multiple industries, including the extraction of hydrocarbons for other industrial gases and fuels.
True, EVs have now become ingrained in the mainstream consciousness. Nevertheless, the best lithium-ion EV battery in the market today still cannot compete with gasoline’s energy density. This has presented an opportunity for contrarian investors as it’s possible that oil stocks — many of which have been strong premarket movers this year — have a longer-than-expected lease on life.
Crude oil, however, cannot last forever. This is why investors must balance a heavily look at crude oil with other energy sources because, at some point in the future, crude oil will dip. When crude oil dips, you want to be invested in its alternatives so that your portfolio is healthy and you will profit when selling off your crude oil positions, should you choose to do so.
Best Online Brokers for Crude Oil Stocks
Because oil stocks represent a critical component of our economy — you couldn’t enjoy the robust global transportation network without crude oil — several funds incorporate the major firms in their portfolio. As such, you’ll have no problems finding compelling fossil-fuel-based investments listed among popular online brokers.
Therefore, the best online brokers for oil stocks mostly come down to personal preference. Since key incentives like commission-free trading have essentially become standardized, you can take your time picking the platform that works for you.
If you’re working a crowded schedule day to day and don’t have the time to shadow your holdings, a mobile trading app may be the best choice for you. On the other hand, if you anticipate trading for a living, you’ll want a comprehensive platform.
Below are the best online brokers to consider.
Features to Look for in Crude Oil Stocks
- Supporting fundamentals: As one of the critical bellwethers of the economy, oil stocks provide a real-time indicator of consumer sentiment. For instance, if the labor market is booming, this should result in higher traffic statistics, which in turn bolsters oil demand. As well, more money in the hands of consumers will lead to both domestic and international travel, which is incredibly bullish for the sector.
- Technical momentum: Generally, you don’t want to buy oil stocks if most investors feel jittery about the sector or consumer sentiment. In these cases, you may see price action among benchmark oil stocks that is pensive or chaotic. If so, you’ll want to consult common technical patterns to gauge potential downside risk.
- Fiscal growth: If the broader economic fundamentals are supportive of oil stocks and chart patterns confirm the optimism, at some point, the bullishness should reflect in stronger revenue and earnings per share for your prospective companies. Without this data, you may want to rethink the target firms’ investment propositions.
Perfect for the Risk-Tolerant Contrarian
A year ago nobody wanted to touch oil stocks, even with a 20-foot pole. Now, the concept makes much more sense, with the availability of multiple coronavirus vaccines and the labor market steadily striving to rebound. However, the COVID-19 pandemic threw the entire global economy for a loop. Now that the oil market is trying to recover, you need to look at how these stocks match up with your strategy, especially if you’re also looking at other energy assets.
Certainly, oil stocks are not for the faint of heart. However, if you can tolerate potential volatility, it may be worthwhile to get in before the crowd does. Once you’re reading about the recovery on your local news site, it’s probably too late. You want to make sure that you have an idea of where the market is going before you make big moves with your portfolio.
Frequently Asked Questions
What are crude oil stocks?
Crude oil stocks are shares in companies related to the crude oil industry.
Are crude oil stocks a good investment?
Even though there is a focus on renewables, crude oil is still needed to operate the world. That makes crude oil stocks a good investment.
Which crude oil stocks are good?
Check out Benzinga’s recommendations for crude oil stocks on the list above.
Disclosure: The author held a long position in ENLC at time of writing.
Continue reading: BEST OIL PENNY STOCKS