Best Canadian Oil Stocks | Learn more
With so much going on in the world today about inflation and the conflict between Russia and Ukraine, commodity stocks have exploded. For example, Brent crude oil is up about 66% year-to-date. I can see why investors might be licking their chops. However, analysts believe that Canada can quickly increase oil production. So, in this article, I will look at some Canadian oil stocks that you might consider adding to your portfolio.
The price of oil, like any other commodity, is determined by supply and demand. On the supply side, some things have caused oil prices to jump. The most obvious cause is the conflict between Russia and Ukraine. As readers may know, Russia is a giant oil exporter.
Since invading Ukraine, Russia has been subject to a growing list of sanctions. These sanctions have come from NATO allies, companies doing business with Russia and even the international banking industry.
Among these sanctions is the ban on Russian oil exports. Other countries and oil companies could join the sanctions in the coming months. For example, the United States completely banned imports of Russian oil. The UK will phase them out by the end of the year. In addition, Shell has declared that it will no longer buy oil from Russia.
Where will the oil come from?
The Organization of the Petroleum Exporting Countries (OPEC) is a group of 13 of the world’s major oil producing countries. OPEC member countries are mainly found in the Middle East. The alliance acts together and increases or decreases oil production in concert. Together, OPEC controls most of the world’s oil reserves and accounts for much of the oil produced in the world.
Even as the dispute heated up, OPEC said it would stick to its production schedule. The schedule calls for modest, gradual increases for the rest of the year.
Venezuela is another option to increase oil production. Sadly, Venezuelan industry has deteriorated considerably since it was an oil powerhouse years ago. Therefore, the country’s ability to produce enough oil to make a difference is in question. On top of that, Venezuela is already under US oil sanctions. These sanctions should be lifted if Venezuela becomes an option.
A concrete option is Canada. Canada can rapidly increase its oil production. In addition, Canadian oil companies generally have lower than average operating costs.
Keep reading to learn more about Canadian oil stocks.
Won’t green energy reduce the demand for fossil fuels?
Not anytime soon. According to a Forbes article, there is enough wind and solar power to meet the world’s electricity demand 100 times. Sadly, estimates say that won’t happen until around 2035.
I’m sure readers know that petroleum is not used to generate electricity. Oil companies use oil to produce oil. These companies use oil to make gasoline, diesel fuel and jet fuel. The real risk for oil companies is electric cars.
This Car and Driver article estimates that global sales of new electric vehicles could increase from around 4% today to around 70%. However, the 70% mark will not be reached before 2040.
In the future, renewable energy could reduce greenhouse gases and reduce our dependence on fossil fuels. Until then, Canadian oil stocks could benefit from the current chaos in the oil industry.
Top Canadian Oil Stocks
Since most of the news about the current oil situation has already been read by investors, most Canadian oil stocks are up year-to-date. If you think there is room for oil prices to rise, here are some Canadian oil stocks to think about.
- Enbridge (NYSE: ENB): Enbridge is an oil midstream company. This means that its business is to move oil through its pipes from refiners closer to the end user. Enbridge makes sales when it transports oil. If oil production increases in Canada, Enbridge could benefit. In addition, the stock pays a dividend yield of over 6%.
- Canadian natural resources (NYSE: CNQ): Canadian Natural is one of the cheapest oil producers in Canada. Being low cost means the company can earn more profit than other producers. Canadian Natural Resources is also a dividend payer. The stock’s dividend yield is currently around 4%.
- Suncor Energy (NYSE: SU): Suncor Energy is one of Canada’s largest integrated companies. As an integrated petroleum company, Suncor explores, produces, refines and transports its petroleum. Over the past twelve months, Suncor’s sales have exceeded C$38 billion. The stock also has a dividend yield of around 4%.
Canadian energy stocks
Often, oil companies are also producers of other types of energy. One of these energies is natural gas. People use natural gas to heat their homes. If you’ve read the headlines about inflation around the world, you might know that heating costs have gone up a lot. The market price of natural gas has nearly doubled over the past year. If you are more interested in other Canadian energy stocks, consider this one.
- Tourmaline oil (TORONTO: TOU.TO): Don’t let the name fool you. Oil represents only a small portion of this production from Canadian oil inventories. The company is one of the largest natural gas producers in Canada. It is also one of the cheapest natural gas producers.
BJ Cook is a lifelong stock market nerd. He has held several positions in the world of equity research and earned the right to use the CFA designation in 2014. When he’s not writing for Investment U, you can find him seeking new ideas of investment. Outside of the investing community, BJ is a die-hard Cubs fan.