QQQ   432.79 (+0.19%)
AAPL   188.32 (-0.58%)
MSFT   414.11 (+0.01%)
META   470.00 (+0.09%)
GOOGL   145.91 (+0.25%)
AMZN   169.84 (-0.40%)
TSLA   189.56 (+1.06%)
NVDA   696.41 (-0.65%)
NIO   5.82 (-0.68%)
AMD   169.35 (-0.93%)
BABA   70.74 (-3.94%)
T   16.82 (-2.94%)
F   12.83 (+0.23%)
MU   84.88 (-0.34%)
CGC   4.11 (-4.86%)
GE   139.07 (+0.41%)
DIS   110.54 (+11.50%)
AMC   4.09 (+3.81%)
PFE   27.56 (+0.00%)
PYPL   56.13 (-11.24%)
XOM   103.97 (+1.71%)
QQQ   432.79 (+0.19%)
AAPL   188.32 (-0.58%)
MSFT   414.11 (+0.01%)
META   470.00 (+0.09%)
GOOGL   145.91 (+0.25%)
AMZN   169.84 (-0.40%)
TSLA   189.56 (+1.06%)
NVDA   696.41 (-0.65%)
NIO   5.82 (-0.68%)
AMD   169.35 (-0.93%)
BABA   70.74 (-3.94%)
T   16.82 (-2.94%)
F   12.83 (+0.23%)
MU   84.88 (-0.34%)
CGC   4.11 (-4.86%)
GE   139.07 (+0.41%)
DIS   110.54 (+11.50%)
AMC   4.09 (+3.81%)
PFE   27.56 (+0.00%)
PYPL   56.13 (-11.24%)
XOM   103.97 (+1.71%)
QQQ   432.79 (+0.19%)
AAPL   188.32 (-0.58%)
MSFT   414.11 (+0.01%)
META   470.00 (+0.09%)
GOOGL   145.91 (+0.25%)
AMZN   169.84 (-0.40%)
TSLA   189.56 (+1.06%)
NVDA   696.41 (-0.65%)
NIO   5.82 (-0.68%)
AMD   169.35 (-0.93%)
BABA   70.74 (-3.94%)
T   16.82 (-2.94%)
F   12.83 (+0.23%)
MU   84.88 (-0.34%)
CGC   4.11 (-4.86%)
GE   139.07 (+0.41%)
DIS   110.54 (+11.50%)
AMC   4.09 (+3.81%)
PFE   27.56 (+0.00%)
PYPL   56.13 (-11.24%)
XOM   103.97 (+1.71%)
QQQ   432.79 (+0.19%)
AAPL   188.32 (-0.58%)
MSFT   414.11 (+0.01%)
META   470.00 (+0.09%)
GOOGL   145.91 (+0.25%)
AMZN   169.84 (-0.40%)
TSLA   189.56 (+1.06%)
NVDA   696.41 (-0.65%)
NIO   5.82 (-0.68%)
AMD   169.35 (-0.93%)
BABA   70.74 (-3.94%)
T   16.82 (-2.94%)
F   12.83 (+0.23%)
MU   84.88 (-0.34%)
CGC   4.11 (-4.86%)
GE   139.07 (+0.41%)
DIS   110.54 (+11.50%)
AMC   4.09 (+3.81%)
PFE   27.56 (+0.00%)
PYPL   56.13 (-11.24%)
XOM   103.97 (+1.71%)

Oil and Gas Stocks

An oil and gas stock is public company involved in the exploration, drilling, and refinement of oil and natural gas. What is an oil and gas stock?

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CompanyCurrent PricePE RatioMarket CapVolumeAverage VolumeIndicator(s)
Exxon Mobil Co. stock logo
XOM
Exxon Mobil
$103.97
+1.7%
11.70$412.02 billion19.63 million19.20 millionEarnings Report
Dividend Announcement
Analyst Report
Chevron Co. stock logo
CVX
Chevron
$154.06
+1.3%
13.56$290.83 billion9.20 million9.18 millionEarnings Report
Dividend Increase
Analyst Report
Shell plc stock logo
SHEL
Shell
$63.56
0.0%
11.23$211.20 billion4.72 million5.45 millionEarnings Report
Dividend Announcement
ServiceNow, Inc. stock logo
NOW
ServiceNow
$799.44
+1.1%
95.06$163.89 billion892,7671.23 million
ConocoPhillips stock logo
COP
ConocoPhillips
$113.90
+1.4%
12.45$135.25 billion7.70 million5.34 millionAnalyst Revision
News Coverage
BP p.l.c. stock logo
BP
BP
$36.22
+0.1%
7.12$103.75 billion8.76 million10.21 millionEarnings Report
Dividend Announcement
Analyst Report
KKR & Co. Inc. stock logo
KKR
KKR & Co. Inc.
$96.55
+1.9%
23.66$85.45 billion6.75 million3.34 millionDividend Announcement
Analyst Report
High Trading Volume
Equinor ASA stock logo
EQNR
Equinor ASA
$26.37
-2.7%
4.76$82.33 billion9.59 million3.52 millionAnalyst Downgrade
News Coverage
Gap Down
High Trading Volume
ABB Ltd stock logo
ABBNY
ABB
$43.52
+0.3%
21.76$81.90 billion142,599249,959
Waste Management, Inc. stock logo
WM
Waste Management
$189.51
-0.2%
33.54$76.33 billion1.15 million1.54 millionUpcoming Earnings
News Coverage
General Dynamics Co. stock logo
GD
General Dynamics
$269.00
0.0%
22.38$73.41 billion616,9821.37 millionPositive News
Enbridge Inc. stock logo
ENB
Enbridge
$34.33
-0.3%
30.92$72.96 billion6.68 million5.21 millionUpcoming Earnings
Options Volume
Analyst Revision
News Coverage
Brookfield Co. stock logo
BN
Brookfield
$40.53
+2.0%
N/A$66.46 billion2.61 million2.42 millionAnalyst Report
News Coverage
EOG Resources, Inc. stock logo
EOG
EOG Resources
$113.06
+0.5%
8.40$65.93 billion3.13 million2.97 million
Canadian Natural Resources Limited stock logo
CNQ
Canadian Natural Resources
$60.58
+0.4%
12.70$65.00 billion4.06 million3.21 millionPositive News
Phillips 66 stock logo
PSX
Phillips 66
$146.81
+0.2%
9.49$64.59 billion4.02 million3.30 millionDividend Announcement
Analyst Report
Marathon Petroleum Co. stock logo
MPC
Marathon Petroleum
$169.66
+0.0%
7.21$64.42 billion1.79 million3.04 millionAnalyst Report
TransDigm Group Incorporated stock logo
TDG
TransDigm Group
$1,128.57
-1.6%
51.25$62.74 billion442,563223,986Earnings Report
Analyst Revision
News Coverage
Apollo Global Management, Inc. stock logo
APO
Apollo Global Management
$107.46
+1.5%
22.72$60.99 billion3.05 million2.38 millionNews Coverage
O'Reilly Automotive, Inc. stock logo
ORLY
O'Reilly Automotive
$1,020.83
-4.3%
27.16$60.39 billion810,163420,535Earnings Report
Analyst Report
Analyst Revision
News Coverage
Positive News
Gap Down
Enterprise Products Partners L.P. stock logo
EPD
Enterprise Products Partners
$26.25
10.42$57.01 billion5.23 million5.58 millionEarnings Report
Analyst Report
Eni S.p.A. stock logo
E
ENI
$30.92
-0.1%
9.37$55.22 billion347,335291,724
Pioneer Natural Resources stock logo
PXD
Pioneer Natural Resources
$231.76
+1.8%
11.07$54.07 billion1.51 million2.06 millionPositive News
Occidental Petroleum Co. stock logo
OXY
Occidental Petroleum
$58.05
+0.7%
12.70$51.11 billion7.66 million9.09 millionUpcoming Earnings
Dividend Increase
Analyst Revision
The Estée Lauder Companies Inc. stock logo
EL
Estée Lauder Companies
$140.77
-0.8%
108.29$50.37 billion4.30 million3.46 millionEarnings Report
Dividend Announcement
Analyst Upgrade
Analyst Revision
News Coverage
Valero Energy Co. stock logo
VLO
Valero Energy
$141.80
+0.4%
5.73$48.28 billion2.58 million3.44 millionPositive News
AutoZone, Inc. stock logo
AZO
AutoZone
$2,731.66
-3.9%
19.83$47.23 billion283,392160,332Gap Down
Nucor Co. stock logo
NUE
Nucor
$186.28
+0.0%
10.35$45.80 billion1.00 million1.68 millionInsider Selling
Analyst Revision
Hess Co. stock logo
HES
Hess
$146.27
+0.7%
32.50$44.93 billion3.05 million2.55 millionAnalyst Report
Energy Transfer LP stock logo
ET
Energy Transfer
$13.92
+0.1%
13.13$43.78 billion21.22 million14.28 millionUpcoming Earnings
Options Volume
Positive News
Suncor Energy Inc. stock logo
SU
Suncor Energy
$32.25
+0.4%
7.01$41.61 billion4.86 million3.51 millionOptions Volume
The Williams Companies, Inc. stock logo
WMB
Williams Companies
$34.04
-0.7%
15.26$41.41 billion7.09 million6.46 millionUpcoming Earnings
News Coverage
Waste Connections, Inc. stock logo
WCN
Waste Connections
$155.95
-0.6%
48.43$40.18 billion841,029908,249Upcoming Earnings
ONEOK, Inc. stock logo
OKE
ONEOK
$68.97
+0.6%
12.66$40.18 billion2.52 million3.05 million
Fastenal stock logo
FAST
Fastenal
$69.26
-0.3%
34.29$39.58 billion2.66 million4.61 millionInsider Selling
Analyst Revision
AMETEK, Inc. stock logo
AME
AMETEK
$166.38
-0.2%
29.34$38.40 billion976,437944,072Earnings Report
Analyst Report
Analyst Revision
News Coverage
Positive News
Mplx Lp stock logo
MPLX
Mplx
$37.78
+0.2%
9.92$37.83 billion2.24 million2.11 million
TC Energy Co. stock logo
TRP
TC Energy
$37.45
-0.8%
N/A$37.45 billion3.57 million2.31 millionOptions Volume
Analyst Revision
Kinder Morgan, Inc. stock logo
KMI
Kinder Morgan
$16.63
-0.1%
15.54$36.96 billion17.00 million15.88 million
Cummins Inc. stock logo
CMI
Cummins
$249.92
+0.7%
48.25$35.42 billion641,705847,836Earnings Report
Analyst Downgrade
Analyst Revision
Rockwell Automation, Inc. stock logo
ROK
Rockwell Automation
$278.73
+3.6%
26.52$31.94 billion2.03 million1.07 millionDividend Announcement
LyondellBasell Industries stock logo
LYB
LyondellBasell Industries
$94.98
+0.5%
14.68$30.81 billion1.75 million1.72 millionEarnings Report
Analyst Report
Cenovus Energy Inc. stock logo
CVE
Cenovus Energy
$16.31
+2.5%
10.32$30.52 billion11.52 million11.41 millionUpcoming Earnings
Positive News
Baker Hughes stock logo
BKR
Baker Hughes
$29.32
+0.7%
15.35$29.50 billion9.03 million10.70 millionDividend Increase
Diamondback Energy, Inc. stock logo
FANG
Diamondback Energy
$153.48
+1.3%
8.71$27.47 billion1.67 million1.66 million
CGI Inc. stock logo
GIB
CGI
$114.46
+2.4%
22.31$26.59 billion96,701135,293Analyst Downgrade
Analyst Revision
Positive News
Genuine Parts stock logo
GPC
Genuine Parts
$142.31
-0.3%
16.10$19.95 billion1.19 million882,129Upcoming Earnings
Positive News
Hubbell Incorporated stock logo
HUBB
Hubbell
$358.21
+0.9%
25.50$19.21 billion308,302419,737Insider Selling
FLEETCOR Technologies, Inc. stock logo
FLT
FLEETCOR Technologies
$265.12
-9.2%
20.79$19.14 billion1.44 million405,618Earnings Report
Analyst Report
News Coverage
Gap Down
High Trading Volume
Tenaris S.A. stock logo
TS
Tenaris
$31.85
+0.7%
5.23$18.80 billion1.54 million2.15 millionNews Coverage
Positive News
Pembina Pipeline Co. stock logo
PBA
Pembina Pipeline
$33.76
+0.1%
20.97$18.55 billion791,697977,218Analyst Revision
Coterra Energy Inc. stock logo
CTRA
Coterra Energy
$24.51
+0.6%
8.42$18.44 billion5.15 million6.33 millionAnalyst Revision
Positive News
The Carlyle Group Inc. stock logo
CG
The Carlyle Group
$45.61
+3.1%
78.64$16.42 billion4.26 million2.27 millionEarnings Report
Dividend Announcement
Analyst Downgrade
News Coverage
Watsco, Inc. stock logo
WSO
Watsco
$409.41
+1.7%
27.02$16.13 billion234,784320,540Upcoming Earnings
Positive News
Watsco Inc stock logo
WSO.B
Watsco
$390.85
25.80$15.40 billion260Upcoming Earnings
News Coverage
Graco Inc. stock logo
GGG
Graco
$87.83
+0.6%
29.87$14.82 billion899,713674,330Insider Selling
Analyst Revision
Citizens Financial Group, Inc. stock logo
CFG
Citizens Financial Group
$31.37
+0.2%
10.09$14.63 billion4.08 million6.23 millionAnalyst Upgrade
Analyst Revision
EQT Co. stock logo
EQT
EQT
$34.75
+1.5%
4.70$14.29 billion4.38 million5.12 millionUpcoming Earnings
Dividend Announcement
Analyst Revision
Stanley Black & Decker, Inc. stock logo
SWK
Stanley Black & Decker
$89.27
-0.5%
N/A$13.69 billion1.04 million1.44 millionEarnings Report
Analyst Report
Albemarle Co. stock logo
ALB
Albemarle
$114.33
-0.6%
4.05$13.42 billion2.39 million2.68 millionUpcoming Earnings
Marathon Oil Co. stock logo
MRO
Marathon Oil
$22.70
+0.0%
8.41$13.29 billion13.23 million9.30 millionPositive News
LKQ Co. stock logo
LKQ
LKQ
$47.54
-0.1%
13.35$12.72 billion1.20 million1.55 million
Bunge Global SA stock logo
BG
Bunge Global
$86.50
-1.7%
6.69$12.57 billion2.29 million1.77 millionEarnings Report
Analyst Report
Analyst Revision
News Coverage
Aspen Technology, Inc. stock logo
AZPN
Aspen Technology
$189.81
-1.4%
N/A$12.09 billion181,269166,577Analyst Upgrade
News Coverage
Ares Capital Co. stock logo
ARCC
Ares Capital
$20.01
-0.9%
8.66$11.39 billion5.52 million3.70 millionEarnings Report
Dividend Announcement
News Coverage
Texas Pacific Land Co. stock logo
TPL
Texas Pacific Land
$1,484.93
-0.4%
29.13$11.39 billion24,86119,869News Coverage
Positive News
Evergy, Inc. stock logo
EVRG
Evergy
$48.62
-1.5%
16.43$11.17 billion3.52 million3.05 million
Plains All American Pipeline, L.P. stock logo
PAA
Plains All American Pipeline
$15.35
11.46$10.76 billion4.90 million3.44 millionUpcoming Earnings
HF Sinclair Co. stock logo
DINO
HF Sinclair
$58.56
+2.5%
5.07$10.52 billion1.68 million1.68 millionPositive News
Permian Resources Co. stock logo
PR
Permian Resources
$13.53
+2.1%
14.87$10.47 billion9.78 million7.82 millionPositive News
TechnipFMC plc stock logo
FTI
TechnipFMC
$19.25
+0.9%
N/A$8.38 billion6.06 million4.48 millionOptions Volume
Positive News
RBC Bearings Incorporated stock logo
RBC
RBC Bearings
$258.15
-5.4%
45.77$7.51 billion374,252110,954News Coverage
Gap Down
High Trading Volume
Gerdau S.A. stock logo
GGB
Gerdau
$4.26
-2.7%
4.39$7.49 billion4.00 million5.50 millionPositive News
Hess Midstream LP stock logo
HESM
Hess Midstream
$32.55
-0.2%
15.57$7.48 billion858,1381.11 millionInsider Selling
RBC Bearings Incorporated stock logo
ROLL
RBC Bearings
$258.15
-5.4%
125.32$7.47 billion374,252155,583Analyst Report
News Coverage
Gap Down
High Trading Volume
Southwestern Energy stock logo
SWN
Southwestern Energy
$6.48
+1.3%
1.40$7.14 billion13.02 million23.26 millionAnalyst Report
Applied Industrial Technologies, Inc. stock logo
AIT
Applied Industrial Technologies
$184.55
+0.7%
19.37$7.14 billion295,746193,050Insider Selling
Ingredion Incorporated stock logo
INGR
Ingredion
$109.46
-1.1%
11.40$7.14 billion377,959388,558Earnings Report
Analyst Report
News Coverage
Range Resources Co. stock logo
RRC
Range Resources
$28.45
+2.0%
5.10$6.86 billion3.90 million2.48 millionNews Coverage
NOV Inc. stock logo
NOV
NOV
$17.27
+0.5%
6.88$6.80 billion21.57 million5.34 millionEarnings Report
Analyst Report
Options Volume
Analyst Revision
High Trading Volume
Matador Resources stock logo
MTDR
Matador Resources
$55.44
+2.1%
7.88$6.61 billion1.10 million1.03 million
Darling Ingredients Inc. stock logo
DAR
Darling Ingredients
$41.10
-2.8%
9.30$6.56 billion2.02 million2.07 millionPositive News
Antero Resources Co. stock logo
AR
Antero Resources
$21.65
+1.3%
7.79$6.51 billion5.24 million4.75 millionUpcoming Earnings
Analyst Revision
News Coverage
YPF Sociedad Anónima stock logo
YPF
YPF Sociedad Anónima
$15.81
-1.4%
6.10$6.22 billion1.29 million2.01 million
Sunoco LP stock logo
SUN
Sunoco
$60.71
+0.8%
10.92$6.10 billion4.80 million709,881Upcoming Earnings
High Trading Volume
Murphy Oil Co. stock logo
MUR
Murphy Oil
$38.20
+0.6%
9.05$5.90 billion1.79 million2.18 millionNews Coverage
ChampionX Co. stock logo
CHX
ChampionX
$29.08
+0.2%
18.52$5.66 billion1.54 million1.68 millionEarnings Report
Dividend Increase
News Coverage
Viper Energy, Inc. stock logo
VNOM
Viper Energy
$31.72
+0.2%
13.85$5.64 billion383,656556,128News Coverage
Positive News
NewMarket Co. stock logo
NEU
NewMarket
$588.20
0.0%
14.55$5.64 billion39,87249,166
Element Solutions Inc stock logo
ESI
Element Solutions
$22.74
+0.8%
103.34$5.49 billion862,8191.29 million
EnLink Midstream, LLC stock logo
ENLC
EnLink Midstream
$11.95
+0.8%
18.97$5.46 billion2.45 million1.89 millionNews Coverage
MasTec, Inc. stock logo
MTZ
MasTec
$69.25
+0.9%
N/A$5.46 billion597,9911.01 million
Flowserve Co. stock logo
FLS
Flowserve
$41.34
+0.6%
22.23$5.42 billion1.03 million810,596Analyst Revision
News Coverage
Sasol Limited stock logo
SSL
Sasol
$8.13
-1.2%
N/A$5.16 billion499,714589,157
Frontline plc stock logo
FRO
Frontline
$22.09
-1.1%
6.31$4.92 billion1.48 million2.68 millionPositive News
IPG Photonics Co. stock logo
IPGP
IPG Photonics
$101.01
+1.0%
55.50$4.74 billion208,334317,327Upcoming Earnings
Valaris Limited stock logo
VAL
Valaris
$64.87
+4.2%
84.25$4.73 billion1.29 million934,176
Franklin Electric Co., Inc. stock logo
FELE
Franklin Electric
$97.72
+1.1%
23.66$4.50 billion112,857170,802Upcoming Earnings
Positive News
Moog Inc stock logo
MOG.B
Moog
$140.57
26.18$4.49 billion14193Positive News
The Chemours Company stock logo
CC
Chemours
$30.00
N/A$4.45 billion778,8061.04 millionUpcoming Earnings
News Coverage

Recent oil Headlines

More oil Headlines
Oil Stocks

Every investor should have some exposure to oil for the simple reason that it powers the world. The global economy uses oil in many different ways including the gasoline that powers our cars, diesel fuel that’s essential in the trucking industry, jet fuel required for air travel. Oil is also necessary to heat and cool our homes as well as to power factories.

That’s not a complete list by any measure. And that’s the point. Oil and its derivate products (e.g. gasoline) are still essential to the global economy.

This statement remains true even as renewable energy sources are becoming cost competitive with oil. The simple fact is that the world will still be using oil for the near future.

And that means that oil stocks belong in your portfolio. Oil stocks contain less risk than trying to buy and sell oil on the options or futures markets. And most oil stocks pay a dividend which gives investors a predictable income stream that can make up for the volatility that is inherent in these stocks.

In this article, we’ll review why you should consider investing in oil; we’ll review your investment options, and more directly the different types of oil companies that you can invest in.  

Oil is a commodity and like all commodities, its price is fundamentally driven by supply and demand. Simply put when demand for crude oil is high, prices go up. Conversely when demand decreases, so do prices.

For decades, particularly since World War II, demand for oil was high. Many nations were building a new infrastructure of roads and bridges. Air travel was making the world smaller and businesses became truly international. And powering all of it was oil.

However, even during periods of strong growth, the price of oil is affected by seasonal events. As any driver will tell you, the price of gasoline goes up in the summer months because the amount of driving increases.

And the price of oil is also affected by macroeconomic events. For example, when the Covid-19 pandemic caused millions of offices and businesses to close, it had a devastating effect on the oil and gas sector. In fact, at one point, the futures contract for a barrel of oil turned negative.

Understanding how oil supply and demand impacts oil makes it a reliable indicator of economic activity. When analysts and institutional investors forecast decreasing demand for oil, they bid down the price of crude oil. This in turn affects oil stocks which as we said tend to move with the market.

And as we mentioned in the introduction, despite the continuing growth of alternative energy sources, oil will remain a worthwhile investment. And oil stocks can be a way for risk-averse investors to have exposure to the oil sector without dabbling in the commodities market.

Oil is expensive to bring to market. It’s more than just the cost of extracting it from the ground. Oil has to be transported, stored, and in many cases refined into gasoline or other products. And those costs are usually fixed.

This is a double-edged sword for the oil companies. When a barrel of oil sells for more than the sum of all these costs, oil companies turn a profit. And stocks of oil companies will go up as well.

However, the opposite is also true. When oil sells for less than, many of these companies will lose money. During these times, stocks of oil companies will go down.

Investing in oil stocks would be easier if all oil companies were affected the same way by rising or falling crude prices. But, in fact, the oil sector is very diverse and each sector may be affected slightly differently by rising or falling oil prices.

Here is a brief description of different kinds of oil companies and their role in the production of oil:

  • Upstream companies – These are the companies investors most frequently think about as an oil stock. These companies are involved in exploration and production. As the name implies, this means these companies explore locations looking for oil. When they find a promising location, they drill wells to extract the oil. However as you might imagine, these companies are affected most by changes in the price of crude oil. The largest upstream company in the United States is ConocoPhillips (NYSE:COP).

  • Midstream companies – These companies transport crude oil through pipelines that is then stored in terminals that they own. The oil stays there until it is sent to be refined or exported. Some of these companies will even transport the newly refined company through its own pipeline networks. Midstream companies are slightly more insulated from oil price fluctuations because they usually operate on long-term contracts with fixed terms. One of the leading midstream companies is Enterprise Products Partners (NYSE: EPD). A unique aspect of EPD stock is that the company is a master limited partnership. This has tax advantages for individual shareholders but can increase the risk of larger losses.

  • Downstream companies – These companies refine oil into other products such as gasoline and petrochemicals. In many cases, these companies are also part of selling this refined product to consumers. Two examples of downstream companies are gas station operators and refinery operators. Although these companies are not directly affected by a drop in crude prices, their stock still tend to fall when oil prices fall. One of the major downstream companies is Phillips 66 (NYSE: PSX).

  • Integrated companies – These companies do business in more than one of the fields mentioned above. When you hear a reference to “Big Oil” companies, it is a reference to companies such as ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) that have large upstream and downstream operations with some midstream business.

  • Oilfield services companies – Another way to invest in oil stocks is through the companies that provide equipment, operational support, and logistics to other oil companies, typically upstream companies. Oilfield services companies are hurt when oil prices fall because one of the first things upstream companies will do is cut their service costs.

Although oil stocks generally move in concert with the price of a barrel of crude, the correlation is not always exact. For example, many oil companies will talk of a “break even” point. This can allow the price of crude to fall a little while these companies can still be profitable. This makes oil stocks a slightly less risky option than trading oil in the options or futures market.

But perhaps the most important reason to own oil stocks is that many oil stocks pay a dividend. For example, prior to the pandemic some oil companies had increased their dividends for decades. These companies know that preserving its dividends has to be a priority because of the volatility associated with the underlying price of oil.

However, it’s important that you focus less on a company’s dividend yield (which can move up or down with the share price), but also on how the yield compares to the company’s free cash flow (FCF). In general investors want to find companies that can pay their entire dividend obligation out of its FCF. This “payout ratio” should be at least 1.1.

ETFs Are a Different Way to Invest in Oil Stocks

The easiest and more popular way to invest in oil stocks is to buy stocks of individual companies. However, investing in an exchange-traded funds (ETFs) can be a smart way to manage the risk of this sector. An oil ETF allows investors to invest in one or more of the sectors listed above at one time. For example, the SPDR Oil and Gas Exploration & Production ETF (NYSEARCA: XOP) tracks the upstream sector.

Buy-and-hold investors may be reading this thinking. Yes, buying oil stocks may be good today, but what about 20 years from now? However, oil companies have been asking themselves that same question for the better part of 30 years. And that’s why some of the largest oil companies continue to make significant investments in renewable energy.

  • ExxonMobil (NYSE: XOM) is investing up to $1 billion per year to conduct research in low-carbon technologies. This may not have a payoff for decades.

  • Chevron (NYSE: CVX) has small investments in wind, solar, and geothermal projects that could potentially power over 110,000 U.S. homes. The company is also a leader in renewable diesel and liquefied natural gas.

  • P. (NYSE: BP) was a pioneer in this area in the early 1990s and currently owns 1.4 gigawatts (GW) of American wind power and solar leader Lightsource BP. The company is also part of a 50-50 joint venture with DuPont (NYSE: DD) in next-generation renewable fuels.

Not surprisingly many of these companies are also among the best performing oil stocks with regard to total return (i.e. share price growth combined with dividends).

Although they remain highly cyclical in nature, oil stocks are still an attractive investment opportunity. The fortunes of oil companies depend to a greater or lesser extent on the price of crude oil. That’s why investors should understand what role a company plays in the production and/or delivery of oil to the market.

However, the benefit of having multiple options is that investors have many options including buying shares of ETFs that add even more diversity. And because oil and gas companies are taking an increased interest in renewable energy many of the most profitable oil stocks today will continue to be good investments in the future.



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