3 Oil Stocks to Buy as Crude Prices Continue to Gush Higher InvestorPlace - Stock Market News, Stock Advice & Trading TipsThese oil companies have been major beneficiaries of the run-up in global oil prices in recent months, with more gains...
By Joel Baglole
This story originally appeared on InvestorPlace
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Oil stocks continue to surge as the market reacts to Russia's ongoing invasion of Ukraine and the prospect of the U.S. allies joining Washington in banning Russian oil.
West Texas Intermediate (WTI) crude futures, the U.S. oil benchmark, recently topped $130. The international benchmark, Brent crude oil, hit a high of $139.13, also its highest level since 2008, before retreating to $125.
The surging prices come as the Biden administration announced a ban of Russian oil and natural gas, raising pressure on European allies to do the same.
And while surging energy prices are tough on consumers (the average for a gallon of gas in the U.S. has now exceeded $4) they are great for oil producers and their shares. Here are three oil stocks to buy as crude prices continue to gush higher.
Oil Stocks: Occidental Petroleum (OXY)
Shares of Houston-based Occidental Petroleum were already doing well this year, having risen 75% since the start of January to right around $55. However, news that legendary investor Warren Buffett has taken a $5 billion stake in OXY stock even as the share price continues to rise has been a further boost of confidence in the oil exploration and manufacturing giant.
Buffett's holding company, Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) now owns 91.2 million common shares of Occidental Petroleum, worth approximately $5.1 billion. Berkshire Hathaway owns nearly 10% of Occidental's common shares. But it also has warrants to buy another 83.9 million shares at a price of $59.62.
In addition to rising oil prices, Buffett was also likely attracted to OXY stock by the 8% annual dividend the company pays. With that dividend yield, Berkshire Hathaway will receive a quarterly payout from Occidental Petroleum worth $200 million. Not too shabby.
Shell (SHEL)
British-based Shell, which is one of the world's half dozen "supermajor" oil producers, has found itself in the middle of a public relations crisis over revelations that it has stepped up purchases of Russian oil, buying it at discounted prices, following the invasion of Ukraine. Shell said in a written statement that its decision to purchase Russian oil at a discounted price was "difficult," confirming that it had bought a cargo of Russian crude oil on March 4.
While politicians debate cutting off Russian energy products, most private sector buyers are already avoiding Russian oil and natural gas. According to an analysis by JPMorgan, 66% of Russian oil is struggling to find buyers on the market today. Russia is the world's second-highest producer of crude oil after Saudi Arabia, and supplies about a third of Europe's needs. Shell said it was forced to buy oil from Russia to maintain timely supplies of fuel throughout Europe.
Despite the controversy, SHEL stock has performed well this year as global oil prices continue rising. In the past six months, Shell's share price has gained 28%, including a 15% leg higher so far in 2022. Shell's stock is now trading at $53 a share.
Oil Stocks: Imperial Oil (IMO)
One of the big beneficiaries of the crisis in Europe and current squeeze in oil prices has been neighboring Canada. A net energy exporter and the largest supplier of crude oil to the U.S., Canada is home to the world's third-largest oil reserves.
Nations looking to cut off supplies of Russian crude oil are increasingly looking north to Canada as a more stable and reliable supplier. And that's been good news for Canadian oil stocks, notably Imperial Oil.
Year-to-date, IMO stock is up 27%, bringing its gains over the past year to 92%. At about $45 a share, Imperial Oil's stock continues to climb to new heights. Today, Imperial Oil is Canada's second largest integrated oil company. And it is majority owned by American oil giant ExxonMobil (NYSE:XOM), which holds a nearly 70% stake in Imperial Oil.
Any efforts to increase oil supply from Canada will surely benefit Imperial Oil and its shareholders.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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