Best Oil Stocks of 2022: Oil Investing 101 | The Motley Fool (2023)

Oil companies are crucial to the global economy. They provide fuels for transportation and power. They also supply the core ingredients of petrochemicals used to make products such as plastics, rubber, and fertilizer.

Best Oil Stocks of 2022: Oil Investing 101 | The Motley Fool (1)

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However, the oil industry is highly competitive and volatile. Profits and losses can swing wildly based on small shifts in demand or moves by petrostates such as Saudi Arabia and Russia, whose interests can run counter to the public companies in the industry. Supply and demand imbalances can cause huge fluctuations in oil prices. We saw that in early 2022 after Russia’s invasion of Ukraine, which sent crude prices soaring into the triple digits for the first time in years.

Additionally, investors must consider the implications of climate change for the long-term prospects of oil and gas. The energy sector is undergoing a massive transition to renewable energy. Even so, that doesn't mean there are few opportunities in the oil patch. Here's a closer look at some of the top oil stocks and factors to consider before buying oil stocks.

What are the top oil stocks to invest in?

There are dozens of oil stocks. They run the gamut from pure-play E&Ps, midstream companies, service providers, and refiners to integrated oil majors that do a little bit of everything. That gives investors lots of options.

However, some oil stocks stand out as leaders in the sector. Five top ones are:

Data source: Company websites.
Oil stockTicker SymbolDescription
ConocoPhillips(NYSE:COP)A global E&P company.
Devon Energy(NYSE:DVN)A U.S.-focused E&P company.
Enbridge(NYSE:ENB)A Canadian energy infrastructure giant.
ExxonMobil(NYSE:XOM)A large-scale, integrated oil supermajor.
Phillips 66(NYSE:PSX)A leading refining company with midstream, chemical, and distribution operations.

Here’s a closer look at these top oil stocks.

ConocoPhillips

ConocoPhillips is one of the largest E&P-focused companies in the world. It specializes in finding and producing oil and natural gas and has operations in more than a dozen countries.

ConocoPhillips benefits from scale and access to some of the lowest-cost oil on earth, which includes significant exposure to the Permian Basin. It bulked up its position in that low-cost, oil-rich region in 2021 by acquiring Concho Resources and Shell’s assets in the area. With average costs of about $40 per barrel and many of its resources even cheaper, it can make money in almost any oil market environment, enabling the company to generate lots of cash flow.

Given the uncertainty surrounding future oil demand, ConocoPhillips plans to return a significant portion of its free cash flow to investors in the coming years. It plans to pay a steadily growing dividend, repurchase shares, and pay a variable return of cash based on its excess cash.

Finally, the company complements its low-cost portfolio with a top-tier balance sheet. ConocoPhillips routinely boasts one of the highest credit ratings among E&P companies, backed by a low leverage ratio for the sector and lots of cash. These factors make it one of the safest E&P investments.

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Devon Energy

Devon Energy is a U.S.-focused E&P company. It has diversified operations across several low-cost, oil-rich basins. The company’s diversification enables it to produce lots of low-cost oil and natural gas, which allows it to generate plenty of cash.

The company launched an industry-first fixed-plus-variable dividend framework in 2021. It pays out as much as 50% of its excess cash flow each quarter via variable dividend payments after funding its fixed base dividend and capital expenses. Devon uses the rest of its excess cash to strengthen its balance sheet and repurchase shares.

Devon’s dividend strategy makes it an enticing option for income-focused investors. They’ll collect a steady base dividend that’s sustainable throughout the oil price cycle and have the potential to earn significant payments during periods of high prices.

Enbridge

Enbridge operates one of the biggest oil pipeline systems in the world. It transports 30% of the oil produced in North America. Enbridge also has an extensive natural gas pipeline system, a natural gas utility business, and renewable energy operations.

Enbridge’s pipeline operations generate stable cash flow backed by long-term contracts and government-regulated rates. That gives it the cash to pay a high-yield dividend while also investing to expand its energy infrastructure operations.

Enbridge has made significant investments in recent years on infrastructure geared toward cleaner energy. This includes natural gas pipelines, offshore wind energy in Europe, and hydrogen energy. These investments position Enbridge for the future of energy even as it remains vital to supporting the oil market’s current needs.

ExxonMobil

One of the largest oil companies on the planet, ExxonMobil is a fully integrated supermajor. It operates in every segment of the oil and gas industry, including E&P, midstream, petrochemical manufacturing, refining, and, even farther downstream, marketing refined and petroleum products to customers.

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ExxonMobil has focused its more recent efforts on reducing its business costs and boosting efficiency. These investments are beginning to pay off in 2022. The company has significantly lowered its oil production costs over the past couple of years by focusing on its highest-return assets while also taking steps to better leverage its massive scale. That enables it to generate lots of cash flow when oil prices are much higher.

This cash flow should continue to protect ExxonMobil's dividend and its status as a Dividend Aristocrat. Given the growth of renewables, many investors are choosing to avoid oil stocks entirely. However, ExxonMobil is making investments in lower-carbon fuel sources, including carbon capture and storage and biofuels. That should enable it to continue supplying the economy with fuel for years to come.

Phillips 66

Phillips 66 is one of the leading oil refining companies, with operations in the U.S. and Europe. It also has investments in midstream operations and in petrochemicals via its CPChem joint venture with Chevron (NYSE:CVX). Finally, its marketing and specialties business distributes refined products and manufactures specialty products such as lubricants.

Thanks to its large-scale, vertically integrated operations, Phillips 66 is among the lowest-cost refiners in the industry. This is the result of both leveraging its integrated midstream network to obtain lowest-cost crude for refining and petrochemical feedstocks and investing in projects that give it higher margins on its products.

Phillips 66 also boasts a strong financial profile, which includes an investment-grade balance sheet with very manageable debt. It also has lots of cash on hand. The low debt and high cash reserves mean it has ample capital to invest in expansion projects, including renewable fuels.

It's been a dividend growth superstar and a share buyback dynamo over the past decade. The company’s focus on making smart investments and returning cash to investors should enable Phillips 66 to continue enhancing shareholder value in the coming years.

How to analyze oil stocks

The oil industry is inherently risky for investors. Although each segment of the industry has a specific set of risk factors, the overall oil business is both cyclical and volatile.

Oil demand generally tracks economic growth. A robust economy can support rising oil prices and oil producer profitability. However, geopolitics and capital allocation also play crucial roles in the industry.

The world’s largest oil-exporting nations include members of OPEC (Organization of the Petroleum Exporting Countries), a cartel that works to coordinate members’ oil policies. OPEC's actions can significantly affect the price of oil. It can withhold supply to push prices higher or increase its output to drive them lower. OPEC has wielded its power over the years, causing massive fluctuations in oil prices.

Meanwhile, oil companies that operate independently of OPEC can also have an impact on oil prices. If they allocate too much capital to new projects, they can cause an oversupply and weigh on prices. Meanwhile, if they hold back too much, they can cause prices to surge. Since oil and gas assets are developed over a long time, companies cannot quickly increase their supplies in response to favorable market conditions.

Given the volatility of oil prices, an oil company must have three crucial characteristics to survive the industry's inevitable downturns:

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  • A strong financial profile with an investment-grade bond rating, significant amounts of cash on hand or ample access to affordable credit, and manageable, well-structured debt maturities.
  • Low costs of operations or relatively stable cash flow streams. E&P companies need to be able to profitably sustain operations at oil prices of less than $40 a barrel, while midstream companies should get more than 85% of their cash flow from steady revenue sources such as fee-based contracts. Downstream companies should have operating costs below the industry average.
  • Diversification. Oil companies should operate in more than one geographical region or be at least partially vertically integrated by engaging in several different activities.

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Risk management is the key to investing in the oil patch

The oil market can be quite fragile, with even a slight imbalance between supply and demand often causing it to go haywire. That was abundantly evident in early 2020 as the COVID-19 pandemic sent the sector into a tailspin. However, the opposite is also true: Oil prices can skyrocket when demand improves amid a supply crunch. That was the case in early 2022 when crude prices surged as the economy started recovering from the pandemic and supplies were under pressure following Russia’s invasion of Ukraine.

Because of this dynamic, investors need to be careful when choosing oil stocks. They should focus on companies that can survive rough patches since they’ll be better-positioned to thrive when markets turn healthy again.

Oil Stock FAQs

How do I invest in oil stocks?

It's important for investors to be aware of the oil sector's volatility. Because of that, it's best to focus on companies built to weather the sector's inevitable downturns. That means focusing on those with relative immunity to price fluctuations, such as E&Ps with ultra-low production costs and integrated oil giants. Another way to invest in the oil patch is to focus on using it to generate dividend income.

Are oil and gas companies a good investment?

While oil and gas is a comparatively risky sector, some companies are safer than others. Petroleum-based fuels and natural gas usually have a cost advantage over other heating and transportation fuels, and they have a massive infrastructure advantage over emerging clean energy fuels. That said, the industry also has some negative features that increase risk for investors.

Should I invest in oil and gas companies now?

The coronavirus pandemic caused global oil demand to crash while oil producers slashed their output to ride out the downturn. But, as travel and commerce recovered, it led to the demand for oil products recovering faster than production could respond. As a result, oil prices have returned to recent pre-COVID levels.

The tightening of supply and the recovery in global demand certainly bodes well for many oil and gas companies, and some could be huge winners in the near term. However, if energy investors should have learned anything over the past decade, it's that market conditions can change quickly. For this reason, most investors considering oil stocks would do well to focus on high-quality, larger integrated oil companies such as the ones described in this article.

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Matthew DiLallo has positions in ConocoPhillips, Enbridge, and Phillips 66. The Motley Fool has positions in and recommends Enbridge. The Motley Fool has a disclosure policy.

FAQs

What is the best oil stock to own right now? ›

4, 2022.
  1. Chevron. Market value: $308.6 billion. Dividend yield: 3.6% Analysts' consensus recommendation: 2.07 (Buy) ...
  2. ConocoPhillips. Market value: $147.2 billion. Dividend yield: 1.7% Analysts' consensus recommendation: 1.67 (Buy) ...
  3. Diamondback Energy. Market value: $23.6 billion. Dividend yield: 5.2%
11 Oct 2022

Is oil a good investment in 2022? ›

Oil stocks rose quickly through the first half of 2022 and have maintained strong year-to-date gains. While the S&P Commodity Producers Oil & Gas Exploration & Production Index shows a loss of some of those gains since June, prices again are trending upward as of Oct. 17, 2022.

What are the Motley Fool's Top 10 stocks? ›

The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway (B shares), Bitcoin, Block, Inc., Etsy, FedEx, Intuitive Surgical, MercadoLibre, PayPal Holdings, Pinterest, Shopify, and Walt Disney.

What is the best energy stock for 2022? ›

Best energy stocks as of November 2022
Company and ticker symbolPerformance year to date (percent)
ExxonMobil (XOM)81.1%
Marathon Petroleum (MPC)77.6%
Devon Energy (DVN)75.6%
ConocoPhillips (COP)74.7%
6 more rows
1 Nov 2022

What is the most successful oil company? ›

Big Oil: The Largest Oil and Gas Companies by Market Cap
RankCompanyCountry
1Saudi AramcoSaudi Arabia
2ExxonMobilU.S.
3ChevronU.S.
4ShellNetherlands
6 more rows
25 Oct 2021

When should I buy oil stocks? ›

It's generally better to buy oil stocks when oil prices are low and expected to rise rather than when they are already high. However, the price of oil affects different types of oil stocks in different ways. Checking out the recent price of oil is a critical first step in oil investing.

Which oil ETF is best? ›

BNO, OIL, and USO are the best oil ETFs for Q4 2022

Oil ETFs provide investors a straightforward way to gain exposure to those price swings without having to buy and store the physical commodity or navigate the complexities of investing in oil futures contracts.

Is Chevron a good stock to buy 2022? ›

Is Chevron Stock a good buy in 2022, according to Wall Street analysts? The consensus among 17 Wall Street analysts covering (NYSE: CVX) stock is to Buy CVX stock.

What is Motley Fool's all in buy? ›

So what do they mean by this “All In” buy signal? Basically, it just means a stock that they like so much, they've recommended it more than once. Not necessarily that this second (or third, or fourth) recommendation has been made today, or this week, but, you know, sometime.

What is Motley Fools ultimate buy? ›

These advertisements highlight different services and promotions from the Motley Fool… …but they all revolve around recommending stocks with growth potential. Some of the ads are labeled as “Motley Fool Ultimate Buy,” and prompt you to click to find out what is so “ultimate” about the stock they are recommending.

What are Motley Fools Rule Breaker stocks? ›

The Motley Fool Rule Breakers is a stock advising service that is tailored for users looking for high-growth stocks in high growth industries. This means that they are not looking for high dividend, slow growing stocks. They are not looking for stocks to day trade or swing trade.

What is the fastest growing stock in 2022? ›

Best-performing growth stocks
Company Name & SymbolRevenue Growth (Last Qtr vs. Same Qtr Prior Yr)Price Performance (This Yr)
Enphase Energy Inc. (ENPH)80.56%67.81%
Clearfield Inc. (CLFD)83.94%43.89%
Palomar Holdings Inc. (PLMR)38.02%37.35%
UFP Technologies Inc. (UFPT)86.25%33.58%
21 more rows
1 Nov 2022

Is Exxon a buy sell or hold? ›

Exxon Mobil has received a consensus rating of Buy.

What stock should a beginner buy in 2022? ›

Best Low Risk Stocks To Buy In 2022
  • Shell plc (NYSE:SHEL)
  • Costco Wholesale Corporation (NASDAQ:COST)
  • PepsiCo, Inc. (NASDAQ:PEP)
  • Walmart Inc. (NYSE:WMT)
  • AbbVie Inc. (NYSE:ABBV)
  • The Home Depot, Inc. (NYSE:HD)
24 Oct 2022

Who has the best oil in the world? ›

Proven Oil Reserves, by Country
RankCountryOil Reserves (billion barrels)
#1Venezuela304
#2Saudi Arabia298
#3Canada170
#4Iran156
10 more rows
7 Jun 2021

What is the prediction for oil prices for 2022? ›

Prices. The Brent crude oil spot price in our forecast averages $93 per barrel (b) in the fourth quarter of 2022 (4Q22) and $95/b in 2023.

What is the future potential for oil? ›

Most investors believe that oil prices will remain about $60 per barrel through 2024. There are long-term concerns, however, about the energy transition away from fossil fuels. Nearly two-thirds of investors say that peak oil will occur by 2030.

Who is the number 1 producer of oil? ›

United States

Who is the #1 producer of oil and gas? ›

In May 2019 the country became a net oil and gas exporter for the first time since 1953.
...
List of countries by oil production.
CountryOil production 2021 (bbl/day)Oil production per capita 2017 (bbl/day/million people)
United States11,184,87035,922
Russia10,111,83073,292
Saudi Arabia (OPEC)9,313,145324,866
Canada4,459,455100,931
94 more rows

What is a super major oil company? ›

Big Oil is a name used to describe the world's six or seven largest publicly traded and investor-owned oil and gas companies, also known as supermajors. The term, particularly in the United States, emphasizes their economic power and influence on politics.

Will oil stocks go up 2022? ›

Oil and gas prices are rising wildly in 2022, and they're unlikely to stop anytime soon. These high levels should bode well for these top energy stocks. It's been quite a year for energy stocks.

What month is best to buy oil? ›

When should you buy heating oil? Buying your heating oil during the summer months is usually a better bet; prices tend to drop, as there is less demand. However, keeping an eye on oil prices is always the best strategy, as the summer rule doesn't always work.

What year will oil peak? ›

Predictions
Pub.Made byPeak year/range
2000Duncan2006
2000EIA2021–2067; 2037 most likely
2000EIA (WEO)Beyond 2020
2001Deffeyes2003–2008
15 more rows

What is the biggest oil ETF? ›

the United States Oil Fund LP USO

Is oil ETF a good investment? ›

These energy funds offer exposure to oil and gas stocks, which are some of the rare outperformers in an otherwise miserable year. Energy stocks and exchange-traded funds (ETFs) were a popular bet heading into 2022. So far, so good – the sector has been by far and away the best performer as the end of the year nears.

Does Vanguard have an oil and gas ETF? ›

The Vanguard Energy ETF (VDE) offers investors a diverse play on the oil sector. Read on to find out more about this ETF. including its top holdings, returns, and fees. The Vanguard Energy ETF invests in a wide range of oil companies, with a focus on the industry giants like ExxonMobil and Chevron.

What stocks should I buy in February 2022? ›

AMD, EPAM, MASI, RGEN, & TER represent top stocks to buy now for February 2022.

What is the prediction for Exxon stock? ›

Stock Price Forecast

The 21 analysts offering 12-month price forecasts for Exxon Mobil Corp have a median target of 114.00, with a high estimate of 136.00 and a low estimate of 98.00. The median estimate represents a +0.28% increase from the last price of 113.68.

What stocks are good for next 5 years? ›

Best Stocks to Buy in India for Long Term
  • Reliance Industries. Multinational Conglomerate.
  • Tata Consultancy Services (TCS) Information Technology.
  • Infosys. Information Technology.
  • HDFC Bank. Banking.
2 Nov 2022

What is Motley Fool's average return? ›

Performance. Motley Fool prides itself on the historical performance of Stock Advisor's investment picks. In fact, the team has returned three times that of the S&P 500, according to its website. As of August 9, 2022, Stock Advisor's returns have averaged 373%* compared to the S&P 500's 122%.

What are the top 5 metaverse stocks? ›

Top 5 Metaverse Stocks to Buy
  • Meta Platforms Inc (FB) ...
  • Nvidia Corporation (NVDA) ...
  • Unity Software Inc (U) ...
  • Adobe Inc (ADBE) ...
  • Roblox Corp (RBLX)
27 Oct 2022

What is the safest investment right now? ›

Here are the best low-risk investments in November 2022:
  • Short-term certificates of deposit.
  • Money market funds.
  • Treasury bills, notes, bonds and TIPS.
  • Corporate bonds.
  • Dividend-paying stocks.
  • Preferred stocks.
  • Money market accounts.
  • Fixed annuities.
1 Nov 2022

What is Motley Fool's success rate? ›

The Motley Fool is very good at finding a few stocks that double or triple each year. While about 73% of their picks have been profitable, the stocks that double or triple each year more than offset any losers. For example, as of December 31, 2021 53 of their 144 picks have more than doubled and 33 more than tripled!

What is Motley Fool's double down buy alert? ›

What does a double down buy alert indicate? The double down buy alert indicates that a Motley Fool investing service is recommending a stock for the second or even third time.

What is the 10 am rule in stocks? ›

9:30–9:40 a.m. Stocks that open higher or lower than they closed typically continue rising or falling for the first five to 10 minutes… 9:40–10:00 a.m. … before reversing course for the next 20 minutes—unless the overnight news was especially significant.

What is the 50 rule in stocks? ›

The fifty percent principle is a rule of thumb that anticipates the size of a technical correction. The fifty percent principle states that when a stock or other asset begins to fall after a period of rapid gains, it will lose at least 50% of its most recent gains before the price begins advancing again.

What is the highest a single stock has ever gone? ›

The most expensive publicly traded share of all time is Warren Buffett's Berkshire Hathaway (BRK. A), which was trading at $458,675 per share, as of January 2022. Berkshire hit an all-time high on Jan. 18, 2022, at $487,255.

Which stocks will boom in 2022? ›

A Closer Look at the Best Growth Stocks to Invest in 2022
  • Lucky Block - Start-Up Blockchain Asset Decentralizing the Lottery Industry. ...
  • Meta Platforms - Best Growth Stock to Buy Now for Exposure to the MetaVerse. ...
  • Tesla - Tesla - Top Growth Stock for the Future of Electric Cars.
24 Mar 2022

Which sector will boom in 2022? ›

The consensus seems to be that the financial sector, industrial sector, capital goods will do well in 2022. Pharmaceuticals are also looking to make a mark, and a few experts have placed their bets on real estate and automobiles while others have advised against them.

Which stock is growing very fast? ›

FAST GROWING STOCK
S.No.NameCMP Rs.
3.B H E L75.85
4.Bharat Dynamics995.60
5.BASF India2736.20
6.G N F C711.95
22 more rows

Is XOM going to split soon? ›

XOM has regularly split its shares in the 20th century, but due to low share price growth, there have not been any splits in the recent past. We believe that another stock split in the foreseeable future is unlikely, but that doesn't mean that XOM must be a bad investment.

Is Chevron a buy sell or hold? ›

Consensus Rating

The company's average rating score is 2.57, and is based on 13 buy ratings, 7 hold ratings, and 1 sell rating.

Is Penn buy or sell? ›

PENN Entertainment has received a consensus rating of Buy. The company's average rating score is 2.71, and is based on 12 buy ratings, 5 hold ratings, and no sell ratings.

What is the best performing stock in 2022? ›

Best S&P 500 stocks as of November 2022
Company and ticker symbolPerformance year to date (percent)
ExxonMobil (XOM)81.1%
Marathon Petroleum (MPC)77.6%
Devon Energy (DVN)75.6%
ConocoPhillips (COP)74.7%
6 more rows
1 Nov 2022

What should I invest in in March 2022? ›

10 New Stocks to Buy Now for March 2022
  • eBay (NASDAQ:EBAY)
  • Digital Realty Trust (NYSE:DLR)
  • Upstart Holdings (NASDAQ:UPST)
  • Lincoln Electric Holdings (NASDAQ:LECO)
  • Visteon Corporation (NASDAQ: VC)
  • United States Steel Corp. (NYSE:X)
  • Intuit (NASDAQ:INTU)
  • Roku (NASDAQ:ROKU)
14 Mar 2022

Is it too late to buy oil stocks? ›

If you are wondering about oil prices, the energy market, and whether it's too late to buy Energy Stocks (NYSEARCA: XLE) we're here to tell you no. Absolutely not.

Is Shell a good buy right now? ›

Valuation metrics show that Shell PLC Unsponsored ADR may be undervalued. Its Value Score of A indicates it would be a good pick for value investors. The financial health and growth prospects of SHEL, demonstrate its potential to outperform the market. It currently has a Growth Score of A.

Is there a future in oil? ›

Most investors believe that oil prices will remain about $60 per barrel through 2024. There are long-term concerns, however, about the energy transition away from fossil fuels. Nearly two-thirds of investors say that peak oil will occur by 2030.

What is the future of oil market? ›

World oil demand is now forecast at 99.7 mb/d in 2022 and 101.8 mb/d in 2023.

Is Chevron stock a good buy today? ›

Chevron has received a consensus rating of Buy. The company's average rating score is 2.57, and is based on 13 buy ratings, 7 hold ratings, and 1 sell rating.

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