Which oil stocks to buy now? 3 best choices

Although crude oil and natural gas prices have moderated in recent days, they remain at their highest levels in more than five years and energy stocks remain the best performing stocks of 2022. The S&P 500 Energy Sector Index is up nearly 40% on the year, compared to a 3% year-to-date loss for the broader S&P 500 index.

Energy stocks continue to benefit from crude oil prices that remain above $105 a barrel, their highest level since 2014, as well as from high natural gas prices.

With no immediate end in sight to war in Ukraine and with the Organization of the Petroleum Exporting Countries and its allies (OPEC+) indicating that they plan to maintain oil production at current levels despite global supply constraints, oil prices oil are expected to remain elevated for several more months. Many analysts continue to expect oil prices to exceed $150 a barrel this year.

While this is bad news for consumers, rising prices are helping oil companies and their stock prices recover from the ravages of the global pandemic. Here are three oil stock picks investors can consider buying.

  • Devon Energy (NYSE:NDV)
  • Marathon oil (NYSE:MRO)
  • western oil (NYSE:OXY)

Top oil stocks right now: Devon Energy (DVN)

Source: Jeff Whyte/Shutterstock.com

Devon Energy, based in Oklahoma City, is a good choice right now because the company is not only a major oil company, it is also a major producer of natural gas and natural gas liquids at a time when these energy products are in high demand.

The United States has just reached an agreement with the European Union (EU) aimed at reducing the continent’s dependence on Russian natural gas. The United States has promised to supply Europe with at least an additional 15 billion cubic meters of liquefied natural gas (LNG) by the end of the year. The goal is to wean European countries like Germany and France from the natural gas that comes from Russia. Currently, Russia provides 40% of Europe’s energy needs.

The new natural gas-focused pact is good news for Devon Energy as 27% of the company’s reserves are concentrated in natural gas liquids, and 29% in pure natural gas. At the same time, natural gas prices followed crude oil prices higher. Year-to-date, natural gas prices are up 58%, with analysts calling for a continued rise ahead of the hot summer months.

CNBC host Jim Cramer recently said owning DVN stock is an “insurance policy against continued geopolitical chaos.” Devon Energy’s stock price is up 38% year-to-date at $60.80. It has risen alongside rising oil and natural gas prices since January.

Marathon Oil (MRO)

Marathon Oil (MRO) gas station carport on sunny day with blue sky background

Source: Jonathan Weiss/shutterstock.com

Marathon Oil, based in Houston, Texas, is another diversified energy company that markets natural gas as well as petroleum products. A direct descendant of John D. Rockefeller’s Standard Oil Company, Marathon Oil is today one of America’s leading energy companies.

Its stock has soared this year as the price of crude oil topped $100 a barrel and global demand for natural gas surged. So far in 2022, MRO shares have gained 57% to now trade at $25.75. Over the past 12 months, Marathon Oil’s share price has risen 134%, making it one of the best performing stocks.

In addition to the company’s huge share price appreciation, other reasons to like MRO shares are its 1.12% dividend yield, its $3 billion share buyback program and a price/earnings ratio (P/E) below 10, which is relatively low. when measured against its peers. Additionally, Wall Street analysts expect the company’s earnings to roughly double this year, pushed higher by oil and natural gas prices that are expected to remain high heading into the summer.

If there is one caveat for investors, it is that Marathon Oil stock is currently trading near its 52-week high of $26.22. A short-term pullback could occur. However, in the long term, it remains a top energy choice.

Top Oil Stocks Right Now: Occidental Petroleum (OXY)

A magnifying glass zooms in on the Occidental Petroleum (OXY) website.

Source: Pavel Kapysh / Shutterstock.com

Perhaps the most eye-catching and best-performing oil stock so far this year is Houston-based Occidental Petroleum. This is due, in large part, to the massive investment that Warren Buffett has Berkshire Hathaway (NYSE:BRK.A, BRK.B) holding carried out in Occidental Petroleum.

OXY stock was significantly higher before the announcement of Buffett’s stake, but has gained even more since it was revealed in mid-March that Berkshire Hathaway had bought 136.4 million shares oil major’s ordinary valued at 7.2 billion dollars. Berkshire Hathaway now owns 13% of Occidental Petroleum shares.

During the first quarter of the year, OXY stock rose 103% to now change hands at $56.79 per share. Over the past year, the stock price has increased by 115%.

Along with the purchase of Berkshire Hathaway stock, the company’s shares also benefited from the successful completion of its acquisition of energy company Anadarko, which was first announced in 2019. While the purchase of Anadarko left Occidental Petroleum with $30 billion in long-term debt. , the company is actively working to pay off this debt, announcing its intention to reduce it below $25 billion by April this year. The tightening of its balance sheet should only serve to drive up Occidental Petroleum’s stock further in the years to come.

As of the date of publication, Joel Baglole had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a reporter for the Wall Street Journal and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.


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Felix J. Dixon