The global oil market remains tense according to Saudi Aramco, the world’s largest oil producer. And that doesn’t bode well for a world that still relies heavily on fossil fuels.
“Today, spare capacity is extremely low,” Saudi Aramco CEO Amin Nasser said at a recent conference in London. “If China opens up, [the] the economy starts to improve or the aviation industry starts asking for more jet fuel, you will erode this spare capacity.”
Nasser warns that oil prices could rise rapidly, again.
“When you erode that spare capacity, the world should be concerned. There will be no room for any hiccups, any interruptions, any unforeseen events anywhere in the world.”
If you share Nasser’s point of view, here are three oil stocks to bet on. Even Wall Street sees an advantage in this trio.
Not to be missed
Headquartered in London, Shell (NYSE: SHEL) is a multinational energy giant with operations in more than 70 countries. It produces about 3.2 barrels of oil equivalent per day, has stakes in 10 refineries and sold 64.2 million tons of liquefied natural gas in 2021.
It is also a staple for global investors. Shell is listed on the London Stock Exchange, Euronext Amsterdam and the New York Stock Exchange.
The company’s shares listed on the NYSE are up 13% over the past year.
Piper Sandler analyst Ryan Todd sees opportunity in the oil and gas supermajor. The analyst has an “overweight” rating on Shell and a $70 price target.
Considering that Shell is trading at around $57 a share today, Todd’s new price target implies 23% upside potential.
Chevron (NYSE:CVX) is another major oil and gas major benefiting from the commodity boom.
For the third quarter, the company reported earnings of $11.2 billion, representing an 84% increase over the same period last year. Sales and other operating revenues totaled $64 billion in the quarter, up 49% year over year.
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Last January, Chevron’s board of directors approved a 6% increase in its quarterly dividend rate to $1.42 per share. This gives the company an annual dividend yield of 3.2%.
The stock has also enjoyed a nice rally, up 34% over the past year.
Earlier this month, Barclays analyst Jeanine Wai reiterated an “overweight” rating on Chevron, raising her price target from $196 to $212. That implies an 18% upside potential from current levels .
With a market capitalization of more than $460 billion, Exxon Mobil (NYSE:XOM) is bigger than Shell and Chevron.
The company also boasts the best share price performance of the three in 2022: Exxon shares are up 54% over the past year.
It’s not hard to see why investors like the stock: The giant oil producer is gushing profits and cash flows in this commodity price environment. In the first nine months of 2022, Exxon earned $43.0 billion in profit, a huge increase from $14.2 billion in the same period a year ago. Free cash flow was $49.8 billion in the first nine months, compared to $22.9 billion in the same period last year.
Strong financials allow the company to return money to investors. Exxon pays quarterly dividends of 91 cents per share, which translates into an annual yield of 3.2%.
Jefferies analyst Lloyd Byrne has a “buy” rating on Exxon and a price target of $133, about 16% higher than where the stock is today.
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