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Best oil stocks of May 2024

Wayne Duggan

Verified By
Stephanie Steinberg
Stephanie Steinberg

Stephanie Steinberg

Verified by an expert

“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.

Verified By
Hannah Alberstadt
Hannah Alberstadt

Hannah Alberstadt

Verified by an expert

“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.

BLUEPRINT

Updated 9:01 a.m. UTC May 3, 2024

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The oil market has a long history of boom and bust cycles, but long-term investors willing to ride out the volatility have generated some impressive gains. Oil stocks can also be effective hedges against inflation, as higher crude oil prices boost energy sector margins.

There are several types of oil stocks, including exploration and production companies, pipeline and transportation companies, oilfield technology and services companies, petroleum refiners, and integrated oil majors. Each has advantages and disadvantages.

Here are six of the best oil stocks of 2024 that have significant upside potential and bullish ratings from Wall Street analysts.

Best oil stocks

TotalEnergies (TTE)

Market cap

YTD performance

What you should know

TotalEnergies is a French integrated oil and gas company and one of the largest oil majors in the world. In 2023, it reported $35.9 billion in cash flow and $23.2 billion in net income. TotalEnergies also generated a 20% return on equity and a 19% return on average capital employed. It produced 1.38 million barrels of oil and 1.09 million barrels of oil equivalent of natural gas per day in 2023.

TotalEnergies was financially healthy enough to reduce its debt and raise its dividend last year. It is preparing for the future by investing in renewable energy with the ultimate goal of becoming carbon neutral by 2050.

Pros and cons

Pros
  • Impressive 5% dividend yield.
  • Intends to increase hydrocarbon production in coming years.
  • Expanding its liquified natural gas business will help TotalEnergies capitalize on growing global gas demand.
Cons
  • Environmental, social and governance investors may not approve of the plan to increase hydrocarbon production.
  • Renewable power generation is highly competitive and unlikely to generate significant cash flow in the next several years.
  • Production exposure to Russia creates geopolitical risks.

More details

Marathon Petroleum (MPC)

Market cap

YTD performance

What you should know

Marathon Petroleum is an independent petroleum refiner focused on the Midwest, West Coast and Gulf Coast regions of the U.S. In addition to operating the largest refining system in the country, Marathon owns branded Marathon gas stations and has a large ownership stake in MPLX (MPLX), a pipeline and midstream crude oil transportation and storage company.

In 2023, Marathon reported $9.7 billion in net income and $14.1 billion in net cash from operations. The company also returned $12.8 billion of capital to shareholders via dividends and buybacks.

Unlike many other oil stocks, refiners make money from the price spread between crude oil and refined products. That means they aren’t necessarily negatively impacted when crude prices fall.

Pros and cons

Pros
  • High-complexity refining facilities allow Marathon to adapt to changing feedstock market conditions.
  • Investments in renewable diesel position Marathon well for the future.
  • Relatively high European natural gas prices benefit U.S. refining margins.
Cons
  • West Coast refineries have higher costs.
  • MPLX investment exposes Marathon to fluctuations in crude oil prices more than other pure-play refiners.
  • Electric vehicles could threaten gasoline demand in the long term, especially on the West Coast.

More details

Enterprise Products Partners (EPD)

Market cap

YTD performance

What you should know

Enterprise Products Partners is a North American oil and gas storage and transportation company that provides midstream energy services to producers and consumers of natural gas liquids, natural gas, crude oil, refined products and petrochemicals. It is a master limited partnership, a structure that generally provides investors with an attractive source of dividend income but has unique risks and tax complexities.

In 2023, Enterprise reported total equivalent pipeline volumes of 12.2 million barrels per day, up 9% on an annual basis.

Enterprise pays an attractive 7% dividend yield and has raised annual shareholder distributions for 25 consecutive years. Its management team owns nearly a third of the company’s stock, suggesting insiders have a high degree of confidence about the future.

Pros and cons

Pros
  • Attractive 7% dividend yield.
  • Enterprise’s petrochemical business insulates the company from cyclical downturns in the midstream oil and gas market.
  • Marketing business generates additional fee income and provides useful market data and insights.
Cons
  • NGL export business requires a surge in demand from India and China to be viable in the long term.
  • Enterprise needs strong growth in U.S. hydrocarbon production to maintain asset utilization and revenue.
  • Master limited partnership structure creates tax complications for investors.

More details

Imperial Oil (IMO)

Market cap

YTD performance

What you should know

Imperial Oil is a Canadian integrated oil and gas company and the largest Canadian refiner of petroleum products. Refining accounts for about 75% of its revenue. U.S. oil major Exxon Mobil (XOM) is Imperial’s largest shareholder and has a nearly 70% stake in the company.

In 2023, Imperial reported 407,000 barrels per day of refinery throughput, 94% refinery capacity utilization and 471,000 barrels per day of petroleum product sales. It also generated $3.6 million in net income and returned roughly that same amount to shareholders via dividends and buybacks. The company recently raised its dividend by 20%.

Pros and cons

Pros
  • Analysts project steady earnings and revenue growth in 2024 and 2025.
  • Payout ratio of nearly 23% indicates the dividend isn’t placing financial strain on Imperial.
  • Record production from the Kearl facility in the most recent quarter suggests improving efficiency.
Cons
  • Additional refining capacity coming online in 2024 could negatively impact margins.
  • Company anticipates a 4% drop in throughput volumes and refining utilization in 2024.
  • Cash flow from operations fell sharply in 2023.

More details

Tenaris (TS)

Market cap

YTD performance

What you should know

Tenaris is an oil and gas equipment and services company based in Luxembourg that supplies oil country tubular goods to the global oil and gas industry. It has 7.8 million tons of seamless and welded steel pipe manufacturing capacity.

Tenaris reported impressive 26% net sales growth and 55% net income growth in 2023. Its net sales, net income, and earnings before interest, taxes, depreciation and amortization all hit record highs last year. Tube sales growth in the Asia-Pacific, the Middle East and Africa was particularly impressive in 2023, up 98%.

Tenaris expects revenue in the first half of 2024 to be roughly in line with the company’s impressive revenue numbers in the second half of 2023.

Pros and cons

Pros
  • Tenaris’ Rig Direct program will streamline the OCTG supply chain and create value for investors.
  • Tenaris’ high-tech pipe mill in Bay City, Texas, will help drive record U.S. sales.
  • International offshore drilling growth will drive demand for Tenaris’ premium products.
Cons
  • High-end deepwater offshore product sales have not returned to peak levels before the post-2014 downturn.
  • Competition with pipe manufacturer Vallourec could result in weaker pricing for Tenaris in Brazil and China.
  • Cost-cutting measures by U.S. shale customers in recent years have reduced Tenaris’ pricing power.

More details

HF Sinclair (DINO)

Market cap

YTD performance

What you should know

HF Sinclair is an independent U.S. oil and gas refining and marketing company with operations focused in the Midcontinent, Southwest and Rocky Mountain regions. It has about 678,000 barrels per day of crude oil processing capacity, 34,000 barrels per day of lubricant production capacity and 380 million gallons per year of renewable diesel production capacity.

In 2023, HF Sinclair reported $1.58 billion in net income and $31.96 billion in revenue. It generated $24.15 billion in refining revenue, $4.14 billion in marketing revenue, and $2.76 billion in lubricant and specialties revenue in 2023.

HF Sinclair also took steps toward improving its reliability, completing all refinery maintenance on schedule and on budget. It returned $1.3 billion to shareholders via dividends and buybacks last year.

Pros and cons

Pros
  • HF Sinclair’s Navajo refinery will benefit from Permian Basin production growth.
  • The Sinclair acquisition adds a valuable marketing business.
  • Renewable diesel investments generate high returns and help diversify away from core business.
Cons
  • Large Midcontinent presence exposes HF Sinclair to risks associated with the narrowing Brent/West Texas Intermediate spread and other inland differentials.
  • Acquired lubrication business has not fulfilled expectations.
  • Growing electric vehicle adoption threatens gasoline demand in the long term.

More details

Compare the best oil companies

Methodology

The best oil stocks included above all trade on a major U.S. stock exchange and meet the following criteria:

  • Consensus analyst recommendation of “buy” or better. A high number of analyst “buy” ratings indicates an expectation the stock will outperform the overall market.
  • Market capitalization of at least $10 billion. If a company has a leading market share and competitive advantages in a sizable industry, it will have a market cap of greater than $10 billion. Companies with market caps under $10 billion typically get less media and analyst coverage and scrutiny and can be higher-risk investments than larger, more visible companies.
  • An Altimeter overall grade of at least a B. In selecting the best stocks for this list, we applied a screen, considering only stocks rated a B or better by Altimeter. The overall grade takes into account profitability, earning stability, valuation and earning expectations. Grades of B or higher for both are stocks that are ranked in the top quarter of nearly 5,000 stocks in Altimeter’s stock database. This indicates that these companies have appealing valuations with the ability to improve returns.
  • Forward earnings multiple less than 15. Stocks with low forward earnings multiples are considered attractively valued based on analysts’ projected future earnings. The S&P 500’s forward PE ratio is currently 20.4, according to Yardeni Research.
  • Dividend yield of at least 1%. Investors often turn to oil and gas stocks for dividend income. A dividend yield of at least 1% and a manageable payout ratio make an undervalued oil stock even more appealing.

Why other stocks didn’t make the cut

The oil and gas industry has a long track record of cyclical booms and busts, so stock selection is critical if you want to avoid catastrophic losses during downturns in the oil market. Some oil stocks may appear to be good investments during periods of elevated crude oil prices, but too much leverage, a lack of production discipline or a portfolio of low-quality assets can come back to bite a company and its investors when oil prices drop.

The oil industry may also have a challenging long-term outlook as the world transitions to a clean energy future. Oil companies that aren’t investing in clean energy technology or operating flexible, diversified business models may have hard times ahead.

Final verdict

The oil and gas industry has plenty of stocks with attractive valuations, strong cash flows, sizable dividend yields and the possibility of generating robust long-term gains. Energy sector stocks may be a particularly attractive option in 2024, as analysts see more valuation upside in energy sector stocks in the next 12 months than any other market sector, according to FactSet.

One of our best oil stock recommendations is TotalEnergies, which has an attractive valuation, a multiyear hydrocarbon production growth runway and a 5% dividend. In terms of risk, there are no major flags indicated by Altimeter’s risk assessment tool.

How to buy oil stocks

If you are comfortable analyzing individual oil stocks, you can create a personalized portfolio by choosing those you believe will outperform their peers. For example, you may choose to buy shares of the best oil stocks included above. However, before buying shares of an individual stock, ensure you understand the company's business and financial metrics and are comfortable using basic fundamental valuation strategies. You can reduce risk by diversifying your investments into a large number of stocks rather than concentrating on a few.

You can also invest in oil stocks via exchange-traded funds, such as the Energy Select Sector SPDR Fund (XLE). ETFs provide an easy way to add diversified exposure to dozens of oil stocks at a time and reduce the risks associated with individual oil stocks. However, they also limit the upside you can experience if you focus your portfolio on a handful of top-performing companies. ETFs also charge management fees in the form of expense ratios that can eat into returns over time.

Frequently asked questions (FAQs)

The Independent Petroleum Association of America estimates there are about 9,000 independent oil and natural gas producers in the U.S. There are 23 energy stocks in the S&P 500 and 258 public energy stocks listed on major U.S. exchanges in the energy sector, according to Finviz. The majority of energy sector stocks have at least some exposure to oil or natural gas.

Yes. The energy sector has lagged the overall S&P 500 in the past decade, but oil stocks can perform extremely well when oil and gas prices are high. You can improve your returns by identifying oil stocks that will likely outperform their industry peers.

It can be extremely difficult to predict how stock prices will fluctuate in a given year, but Wall Street analysts seem to believe 2024 will be a good year for oil stocks. Consensus analyst price targets suggest 17.8% upside for the S&P 500 energy sector over the next 12 months, which is more upside than any other market sector.

Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.

Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.

Wayne Duggan

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Wayne Duggan is a regular contributor for Forbes Advisor and U.S. News and World Report and has been a staff writer for Benzinga since 2014. He is an expert in the psychological challenges of investing and frequently reports on breaking market news and analyst commentary related to popular stocks. Some of his prior work includes contributing news and analysis to Seeking Alpha, InvestorPlace.com, Motley Fool, and the Lightspeed Active Trading blog. He’s the author of the book "Beating Wall Street With Common Sense," which focuses on practical investing strategies to outperform the stock market. He resides in Biloxi, Mississippi

Stephanie Steinberg

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Stephanie Steinberg has been a journalist for over a decade. She has served as a health and money editor at U.S. News and World Report, covering personal finance, financial advisors, credit cards, retirement, investing, health and wellness and more. She founded The Detroit Writing Room and New York Writing Room to offer writing coaching and workshops for entrepreneurs, professionals and writers of all experience levels. Her work has been published in The New York Times, USA TODAY, Boston Globe, CNN.com, Huffington Post, and Detroit publications.

Hannah Alberstadt

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Hannah Alberstadt is the deputy editor of investing and retirement at USA TODAY Blueprint. She was most recently a copy editor at The Hill and previously worked in the online legal and financial content spaces, including at Student Loan Hero and LendingTree. She holds bachelor's and master's degrees in English literature, as well as a J.D. Hannah devotes most of her free time to cat rescue.

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