Canada Oil News: Saudi Arabia bets on TSX energy stocks

The energy sector has just seen an interesting turn of events. Saudi Arabia’s sovereign wealth fund bought shares in two TSX oil stocks, Canadian Natural Resources Ltd. (TSX: CNQ) (NYSE: CNQ) and Suncor.

Saudi Aramco, a Saudi Arabian energy company that recently went public, is one of North America’s biggest energy competitors. Compared to North America, energy companies in Latin America and the Middle East have a comparative advantage in terms of cost to produce a barrel of oil. Thus, energy companies in these countries can afford to sell oil at lower prices.

In early March 2020, Saudi Aramco began an oil price war with Russian energy interests. At the end of April, oil fell to historic lows below $ 0 a barrel. The negative price reflected the fear of energy investors of losing money on current reserves, including storage costs.

Throughout May, oil prices rebounded. On Monday, the OPEC basket and US oil are around $ 29 and $ 35 a barrel, respectively. Canadian crude costs $ 27 a barrel.

Canadian Natural Resources underperforms the TSX index

Throughout 2020, Canadian Natural Resources underperformed S & P / TSX Composite Index. While the TSX Composite Index has lost only 10.71% since the start of the year, Canadian Natural Resources has lost 38.79% of its value.

On Monday, the price per share of Canadian Natural Resources was $ 25.71. The TSX oil share price is finally close to its lowest level in 10 years. Even investors who are not fans of energy stocks must admit that now is the time to invest in the oil and gas sector.

CNQ chart

The coronavirus pandemic has ground planes and curtailed other high-carbon activities. Despite the weak demand for oil, it is possible that we have already reached a low in the market value of major oil players like CNQ.

Saudi investments in Toronto Stock Exchange generate interest

Enthusiasts in the energy sector comment on recent Saudi investments in publicly traded Canadian oil companies. These commentators believe that recent purchases by the Saudi Wealth Fund signal a price bottom:

“Saudi Arabia is causing an oil collapse; then buys Canadian oil sands stocks in $ CNQ $ SU at an extremely low price. It doesn’t take genius to figure out what comes next, or how our nation is being attacked by foreign interests from all sides. https://t.co/pdByGjRzPA ”

– Dr Keith R. Brunt (@prof_brunt) May 18, 2020

Saudi Arabia may intend to profit from the trough in the prices of these Canadian energy stocks – a trough that created that country’s oil sector.

Should you buy this TSX oil share?

Many savvy stock market players follow investments from large institutions like Saudi Arabia’s sovereign wealth fund. Finding a good business partner is never a bad idea.

In addition, Canadian Natural Resources issues a fairly high dividend. At the current share price, the dividend yield is above 6%. The only risk is a possible decrease in future dividend payments. On May 7, Canadian Natural Resources announced a quarterly cash dividend of $ 0.425 to shareholders of record on June 12.

The shareholders of Canadian Natural Resource are fortunate that the company has not reduced its dividend like many other publicly traded companies in the market today.

We don’t know what the company will do in the next few quarters, but it looks like Saudi Arabia’s sovereign wealth fund is feeling pretty bullish on the stock.


This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .

Silly contributor Debra Ray has no position on the stocks mentioned.


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Felix J. Dixon

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