The 7 Best Oil Stocks to Buy in 2024

Even amidst a global push towards renewable energy, oil remains the world’s most traded commodity, and can present lucrative investment opportunities.

However, as was observed in the 2022 bear market, oil is highly prone to volatility, with prices unexpectedly hitting their highest level in eight years. The developing conflict in Ukraine and Russia also had a significant effect on this.

Contrastingly, 2023 saw prices plummet by 50% from last year’s peak, with yet more change likely to come in response to the Israel-Palestine conflict.

But high volatility can be favorable for some investors, with considerable rewards on offer to those who choose carefully. Read on to find out where and how to invest in oil stocks in 2024.

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Are Oil Stocks a Good Investment?

Yes, oil stocks make good long-term investments and should probably form part of a diversified portfolio. Aside from great potential for capital appreciation, investors often stand to earn passive income in the form of dividends.

However, with price of oil entirely dictated by supply and demand, investors must remains wary of the significant short-term volatility that often plagues the industry. To counteract this, investors should monitor economic developments to inform their decision-making.

This volatility also means that short-term gains are unlikely. With that in mind, investors should invest in oil stocks as part of a long-term strategy.

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A Closer Look At The Best Oil Stocks To Invest In

Here is a closer look at the best oil stocks to buy in 2024 based on their market performance during the past year.

Investors should bear in mind that a range of factors – including profit margins, earnings per share and expansion plans – must also be considered before investing.

Marathon Petroleum Corp (MPC)

Oil refiner Marathon Petroleum Corp (MPC) has been a star performer in the energy sector of late, having averaged an annual return of nearly 20% over the past five years, and 32% over the past year. This means that a $1,000 investment in the firm five years ago would be worth almost $2,500 today.

Crucially, MPC is projected to continue its impressive run, with a forward price to earnings ratio of 6.44 – a discount compared to the industry average of 6.57. The firm’s price to earnings growth ratio also betters the industry’s average, with 1.07 compared to 0.82.

MPC also pays a steady dividend to investors, with the current rate sitting at 2.1%.

Phillips 66 (PSX)

Texas-based Phillips 66 is another overachiever in the oil industry, outperforming the broader market with a YTD return of 26% versus an average of 18% (Brent Crude).

But going back further, the firm has arguably been underperforming. Over the past five years, Phillips 66 has achieved around 30% in return growth, paling in comparison to competitors MPC (120%) and Valero Energy Corp (50%).

However, Phillips 66 received a boost in November 2023 when Elliott Investment Management acquired a $1bn stake in the company in a bid to improve its performance. In a statement released alongside the acquisition, the private equity firm said that Phillips 66’s stock could reach $200 (+57%) with improvements.

Targa Resources Corp (TRGP)

Midstream player Targa Resources Corp (TRGP) has been something of a success story in recent years, achieving more than a 200% uptick in stock performance since 2020, whilst also moving from loss to profitability during this time.

This growth also looks set to continue. Return on investment has increased by another 16% during the past year, and analysts have predicted this metric to surge by up to another 34% over the next year.

TRGP also recently announced a quarterly dividend of $0.50 per common share, equating to a yield of 2.18%.

Baker Hughes Co (BKR)

Oil and gas equipment supplier Baker Hughes Company (BKR) has persevered through a waning oil industry during the past year, achieving more than 12% in return growth versus the market average of 1.2%.

The firm boasts a healthy balance sheet – its revenues increased by 20% during the first three quarters of 2023, and it possesses over $36m in assets, with $3.2m of this being cash and equivalents.

There is also excellent potential for BKR to attain further growth, with the energy technology segment just narrowly trailing oilfield services and equipment in terms of operating profit. Based on this, BKR looks set to gain from the ongoing clean energy transition.

Diamondback Energy Inc (FANG)

Independent oil and gas producer Diamondback Energy (FANG) saw exceptional return growth in 2023, with share prices soaring 21% and 12% in the past six and 12 months respectively.

And despite falling short of Wall Street forecasts for its Q1 and Q2 earnings, the firm recovered in Q3 with earnings per share at $5.49 versus a projected $5.01, and bettering its Q2 earnings by more than 22%.

FANG also provides additional returns to investors through a base plus variable dividend. The firm increased base portion to 5.24% following its Q2 2023 earnings.

Valero Energy Corp (VLO)

Since 2014, Valero Energy Corp (VLO) has, including dividends, returned approximately 400% to shareholders – more than double the S&P 500 average.

The world’s largest petroleum refiner, VLO managed to produce record profits in 2022. Despite failing to replicate this success in 2022 at the hands of lower commodity prices, the majority of analysts tracking VLO stock predicted prices to soar, with an average price target of $154 versus $128 at the time of writing.

VLO is also hailed as a market leader for dividend payouts, with the firm’s shareholders receiving $4.08 per share, per quarter.

OKE also pays a generous dividend at a rate of 5.57%, equating to $3.82 per share, per quarter.

How to Judge the Best Oil Stocks Stocks to Buy

While we have offered our analysis on the best oil stocks to buy in 2024, it is critical for investors to develop their own understanding of how to identify a worthwhile investment. Here is our guide to the methodology.

Performance Vs. broader markets

When looking for the best oil stocks in 2024, the first thing to identify is how the company has performed against the broader market.

The SPDR S&P Oil & Gas exchange traded fund (ETF), for instance, is a valuable reference point, allowing  investors to understand the benchmark for overall market performance and gain perspective on the performance of individuals companies.

This was particularly pertinent in the case of Baker Hughes Co, which managed to achieve double digit growth despite the overall market lagging behind at 1.2%.

Operating costs and break-even price

Operating costs are high for oil exploration, production, and transportation companies. Companies with high operating costs are likely to be most affected by event such as oil price changes and production levels, which will in turn impact stock market performance.

Break-even prices are also crucial for oil firms because they represent the minimum price at which the production of oil becomes economically viable for a particular project or operation. The break-even price is the price per barrel at which the revenues from selling oil cover all the costs associated with exploration, drilling, production, and other operational expenses.

Break-even prices are critical for profitability and viability, so a company’s sensitivity to them is vital when it comes to investor behavior.

Diversification into renewables

Prospective oil stock investors should also consider whether or not the company has expressed intentions to diversify into renewable energy.

Many governments have committed to banning conventional petrol and diesel cars, and as a result, established oil companies will need to act quickly to gain a head start in the renewables market.

Dividend program

The oil industry pays some of the best dividends in the stock market. Several of the companies on our list pay generous dividends, including Phillips 66 ($4.20), Valero ($4.08) and Diamondback ($7.99).

Therefore, oil companies can often pose a great investment opportunity for those looking to establish a consistent, passive income stream.

COVID-19 recover

How your chosen oil stock has recovered from the economic headwinds of COVID-19 is a reliable indicator as to the company’s resilience and potential future performance.

Most of the best oil stocks we have analyzed on this page have not only recovered their pandemic-era losses, but have also achieved new heights.

Where to Buy Oil Stocks in 2024

Investors can buy oil stock through various online brokerage platforms, with eToro being a popular choice. eToro offers a user-friendly interface, low minimum deposits, and supports fractional share trading, making it accessible for beginners.

Other popular choices include Robinhood, Webull and Charles Schwab, all of which are known for offering numerous trading options, user-friendly interfaces and commission free structures.

1. eToro – Best platform to buy oil stock

eToro is a social trading platform that offers access to numerous different financial markets and asset classes. Since its launch in 2006, eToro has become home to more than 20 million traders worldwide. The broker offers competitive trading and non-trading fees, with free stock and ETF trading, and no account or deposit fees.

Being a social trading platform means that users can communicate and interact with the rest of the trading community on the eToro platform, much like social networking sites.

The minimum deposit for US-based investors is just $10, and there are no deposit or account fees. This means the entry point for buying oil stock is highly accessible and suitable for beginners. This is possible because eToro supports fractional share trading, meaning that traders can acquire a portion of a more valuable stock.

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2. Robinhood – Commission-free stock investments

Robinhood is a zero commission trading platform renowned for its user-friendly interface. Since its inception, it has gained widespread popularity, attracting millions of users.

Robinhood stands out for its no-commission model, offering zero trading fees trades on stocks, ETFs, and options. Users can engage in social trading, fostering a community atmosphere similar to social networks.

With a low minimum deposit, accessible fractional share trading, and no account fees, Robinhood provides an affordable entry point for investors, making it particularly suitable for beginners.

3. Charles Schwab – Educational tools and resources for stock trading

Charles Schwab is a renowned online brokerage platform known for its extensive range of investment options and comprehensive services. With a reputation for reliability, it caters to a diverse investor base.

Offering a user-friendly interface, Charles Schwab provides access to various financial markets and investment products. While not a zero fees platform, it compensates with a robust suite of research tools and educational resources.

Charles Schwab’s platform supports different account types, making it suitable for both beginners and advanced investors. With a focus on customer service and a commitment to innovation, Charles Schwab is a prominent choice for those seeking a well-rounded online brokerage experience. Verify current details on their official website for the latest information.

4. Webull – A modern and affordable brokerage platform

Webull is a dynamic commission-free trading platform that has gained popularity for its intuitive design and advanced features. Launched in 2018, Webull provides a user-friendly interface with real-time market data and analysis tools.

With a focus on equities and options, it caters to both novice and experienced traders. Webull stands out for offering commission-free trades on a variety of assets, including stocks and ETFs. The platform supports extended trading hours, providing flexibility for active traders.

Webull’s accessible mobile app and desktop platform, along with no minimum deposit requirements, make it an attractive choice for those seeking a modern and affordable trading experience.

Our Verdict on the Best Oil Stocks to Buy in 2024

The price of commodities is booming in the global market, so now might be a good time to invest in the best oil stocks. In addition, the oil sector is not only doing well – but companies operating in this space typically have a strong dividend program.

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Oil Stock FAQs

References

• https://www.marketwatch.com/investing/future/cl.1
• https://www.reuters.com/markets/deals/elliott-acquires-1-bln-stake-phillips-66-cnbc-2023-11-29/
• https://www.morningstar.com/stocks/targa-earnings-50-dividend-increase-2024-demonstrates-high-confidence-future-growth
• https://www.barchart.com/story/news/21221982/consider-this-value-priced-energy-stock-as-oil-prices-rise
• https://www.reuters.com/markets/deals/magellan-midstream-holders-approve-188-billion-sale-oneok-2023-09-21/