The global oil market is known for its volatility. Oil prices fluctuate due to geopolitical tensions, supply-demand imbalances, and macroeconomic trends. In September 2024, several factors, such as OPEC+ production cuts and rising demand from economies recovering from slowdowns, have driven oil prices higher. For investors, this creates an opportunity to capitalize on stocks that perform well in rising oil environments. Below, we explore eight of the best stocks to consider in response to the rising oil prices of September 2024.
8 Best Stocks for Rising Oil Prices of September 2024
1. ExxonMobil Corporation (XOM)
A diversified oil giant benefitting from rising prices
ExxonMobil is one of the largest publicly traded oil companies in the world. It is well-positioned to benefit from rising oil prices, thanks to its diversified portfolio of upstream (exploration and production), downstream (refining and marketing), and chemical operations.
Why it thrives in rising oil markets: As oil prices climb, ExxonMobil’s upstream operations generate higher profits, driving revenue and shareholder value. Its significant oil reserves, coupled with advanced technology and efficient production methods, enable it to extract oil at a low cost.
Global reach: ExxonMobil has a broad international presence, operating in more than 20 countries, allowing it to leverage global market trends. With rising prices, its international operations, especially in regions like the Middle East and North America, are key contributors to growth.
Dividend reliability: A history of consistent dividends makes it attractive to investors seeking income. Even during downturns, ExxonMobil has maintained a strong payout, and rising oil prices further support its dividend program.
2. Chevron Corporation (CVX)
Capital discipline and high returns in volatile markets
Chevron Corporation is another oil supermajor that is highly sensitive to fluctuations in oil prices. Chevron’s focus on capital discipline has enabled it to thrive even in volatile markets.
Strong upstream operations: Like ExxonMobil, Chevron has vast upstream operations, with a focus on North American shale oil and international projects in regions like West Africa. Rising oil prices allow these operations to generate significant cash flow.
Operational efficiency: Chevron’s emphasis on cost-cutting and efficient production processes means that it can profit even when oil prices are moderately high.
Share buybacks: Rising oil prices often lead to increased share buybacks for Chevron. This enhances shareholder value and provides a cushion against market volatility. Chevron’s strong cash flow, fueled by higher oil prices, enables it to return capital to shareholders through buybacks.
3. ConocoPhillips (COP)
A pure-play upstream oil company for high returns
ConocoPhillips is one of the largest independent exploration and production companies, making it an ideal stock to consider in a rising oil price environment.
Focus on upstream: Unlike the integrated oil majors, ConocoPhillips is primarily focused on upstream activities—oil exploration, development, and production. Rising oil prices directly increase its profitability.
Shale expertise: ConocoPhillips has extensive operations in U.S. shale, especially in regions like the Permian Basin. As oil prices rise, shale oil production becomes more profitable, and ConocoPhillips stands to gain from its technological expertise in this sector.
Low-cost production: ConocoPhillips is known for its low-cost production capabilities, which ensure that it can thrive even in less favorable price environments. With prices rising in 2024, it can maximize profits and improve returns to shareholders.
4. BP plc (BP)
Positioned for long-term energy transition and short-term oil gains
BP, one of the world’s oil supermajors, has diversified into renewable energy while maintaining its core oil and gas operations. This makes BP a balanced choice for investors looking to benefit from rising oil prices while considering the energy transition.
Transition to renewable energy: BP has made significant investments in renewable energy, including wind and solar power. However, its oil and gas segment remains a crucial profit driver, especially as oil prices climb.
Profit from oil and gas: Rising oil prices provide BP with a much-needed cash flow boost, which it can reinvest into its growing renewable energy portfolio.
Geopolitical advantage: BP’s global footprint in key regions like the North Sea, the Middle East, and Africa allows it to capture the benefits of rising oil prices in politically strategic locations.
5. TotalEnergies SE (TTE)
A balanced oil major with a strong commitment to sustainable growth
TotalEnergies, based in France, is another international oil major benefitting from higher oil prices in September 2024. However, like BP, it is also heavily investing in renewable energy.
Upstream and downstream strength: TotalEnergies has a balanced portfolio of upstream and downstream operations, giving it exposure to all parts of the oil and gas value chain. Rising oil prices benefit its upstream production, while downstream operations help to buffer any downturns in the future.
Investments in renewables: While oil and gas are its primary income sources, TotalEnergies has a forward-looking approach. It continues to invest in renewables, which provides long-term growth opportunities for investors while capturing short-term profits from rising oil prices.
Global reach: Operating in more than 130 countries, TotalEnergies’ wide geographical presence allows it to benefit from diverse markets as oil prices rise globally.
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6. EOG Resources (EOG)
A leading shale oil producer reaping benefits of high prices
EOG Resources is one of the largest independent oil and natural gas companies in the U.S., with a primary focus on shale production.
Shale oil expertise: EOG Resources has built a reputation as one of the most efficient and profitable shale oil producers in the U.S. As oil prices rise, the company’s expertise in shale production positions it to benefit significantly.
Low debt, high returns: EOG has maintained a disciplined approach to its balance sheet, ensuring low debt levels. This gives the company the flexibility to increase returns to shareholders through dividends and share buybacks as oil prices rise.
Innovative techniques: EOG is known for its innovative drilling and completion techniques, which enable it to increase production at a low cost. With rising oil prices, these techniques become even more profitable, boosting the company’s bottom line.
7. Occidental Petroleum Corporation (OXY)
High exposure to U.S. oil markets with potential for strong growth
Occidental Petroleum is another leading oil and gas company with significant operations in the United States. Rising oil prices, particularly in the U.S. market, have given Occidental a substantial boost in 2024.
Permian Basin advantage: Occidental has extensive operations in the Permian Basin, one of the most prolific shale oil regions in the world. Rising oil prices in the U.S. make Occidental’s operations in this region highly profitable.
Low-cost production: Like EOG Resources, Occidental focuses on low-cost production, which ensures profitability even in less favorable price environments. With oil prices climbing, the company’s margins expand, leading to strong earnings growth.
Environmental focus: Occidental is also working on carbon capture technologies, positioning itself for long-term growth in a low-carbon world. However, its oil production remains its primary income driver, and rising prices in 2024 directly benefit the company’s cash flow.
8. Marathon Oil Corporation (MRO)
Small-cap exposure to rising oil prices
Marathon Oil is a smaller oil exploration and production company compared to the supermajors like ExxonMobil and Chevron, but it is highly sensitive to changes in oil prices.
Lean operations: Marathon Oil’s lean operations and focus on efficiency make it a high-return investment during periods of rising oil prices.
Shale oil expertise: Marathon has a significant presence in U.S. shale, particularly in the Bakken and Eagle Ford regions. As oil prices increase, Marathon’s shale operations become more profitable, driving stock value.
Strong earnings potential: The company’s small size and focus on exploration mean that rising oil prices can have a significant impact on its earnings, leading to potentially higher stock performance relative to larger oil companies.
Conclusion
In September 2024, rising oil prices present a unique opportunity for investors to benefit from stocks in the oil and gas sector. From industry giants like ExxonMobil and Chevron to smaller players like Marathon Oil, these eight stocks provide a diverse range of investment options. Companies with strong upstream operations, low-cost production capabilities, and a focus on shareholder returns are well-positioned to thrive in this environment. Investing in these stocks can help capitalize on current market trends, while also offering long-term potential as global demand for energy continues to evolve.
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