When it comes to trading economic growth, the easiest way to measure the market progression is by looking at the energy trade. After all, the stronger the economy, the higher the demand for petroleum. That is especially true if you are talking about some of the world's largest economies, such as the United States and China.
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Crude oil gives you exposure to growth without trying to pinpoint precisely where it is coming from. All one needs to understand is that an economy is expanding, and therefore multiple parts of that economy will demand more energy. The global leading oil price benchmark, Brent crude oil, is currently above $100 after a constant rise since 2020. The last time Brent crude was above $100 was in 2014. Therefore, trading crude oil stocks can be as simple as understanding where the economy is going as a whole, mitigating a lot of company-specific risks.
Best Oil Stocks to Buy Right Now
- Hoegh LNG Partners (HMLP)
- Vermilion Energy (VET)
- Valero Energy Corp. (VLO)
- Murphy Oil Corp. (MUR)
- Cheniere Energy Inc. (LNG)
- ConocoPhillips (COP)
- EQT Corp. (EQT)
- Coterra Energy Inc. (CTRA)
- Antero Midstream Corp. (AM)
Rapidly Growing Oil Stocks
1. Hoegh LNG Partners (HMLP)
Hoegh LNG Partners offers floating natural gas services and services the oil sector. Based in Norway, they service major clients operating in the North Sea and beyond. The company mainly focuses on owning and operating storage and regasification units in the North Sea and further afield. The company also has a large fleet of gas and oil carriers. With an EPS Growth of 67.34%, this company is one of the fastest growers in the sector. HMLP has a 25% earnings growth from last year (2021) and a fast-growing revenue rate of 20.02%, which is higher than the US Oil and Gas Midstream average of 18.74%.
2. Vermilion Energy (VET)
Vermilion Energy Inc is a fast-growing international energy producer of crude oil. The company is also involved in natural gas, from exploration, acquisition, and development to production. The business is focused on North America, Australia, and Europe. Therefore, its diversified asset base and economic growth in those areas will boost the EPS. The company reported an EPS of $1.66, which is a 705.09% rise year over year, as of March 2022. The company also has a fast-growing earning rate of 92.22% per year compared to the US Oil and Gas E&P industry average of 26.27%.
3. Valero Energy Corp. (VLO)
Valero is the closest thing to a well-known fast grower on this list. The company is a refiner of petroleum and ethanol with operations in Canada, the US, and Aruba. It produces gasoline, distillates, jet fuel, asphalt, petrochemicals, diesel fuels, etc. The company's EPS growth was 380.8% as of January 2022, which is massive for a larger company. By investing in Valero, the investor can play the oil markets without the inherent risk of risking money with the smaller companies.
Best Value for Money Oil Stocks
1. Murphy Oil Corp. (MUR)
Murphy Oil Corporation is a significant oil and gas exploration corporation with assets in producing crude oil and natural gas. The firm also has refineries and retail operations in some areas of the United States. Oil prices plunged over the last couple of years, and Murphy reported a large net loss of 324 million dollars during Q2 of 2020. As world economies recover from the effects of the pandemic, this company will certainly be one of the beneficiaries of the expected high demand for oil. The market cap of $6.5 billion and a 12-month trailing average P/E ratio of 49.71 makes this a strong value play.
2. Cheniere Energy Inc. (LNG)
Cheniere Energy is a long-term player in liquefied natural gas, which is likely to be a profitable enterprise. Some European countries seek ways to reduce their reliance on supplies of gas from Russia. The company also has stakes in crude oil. That gives the trader the ability to take advantage of LNG gains and exposure to the crude oil market. Cheniere is a great value play as it has a $35.5 billion market cap; with a 12-month trailing P/E ratio of 76.07X, it offers excellent value.
3. ConocoPhillips (COP)
ConocoPhillips is a huge corporation that does everything regarding crude oil, natural gas, and other petroleum products from start to finish. The business is involved in oil exploration, production, processing, refining, and marketing. ConocoPhillips is a name that most investors will be familiar with. With a market cap of $132.42 billion and a 12-month trailing P/E ratio of 16.1, ConocoPhillips should be one of the big winners when economies start to expand rapidly again.
Oil Stocks with the Strongest Momentum
1. EQT Corp. (EQT)
EQT Corporation is a company that you may not be aware of. It is somewhat regional, but it is a supplier to some of the major companies you will know about. For example, the company has just entered an agreement with Chevron to acquire and supply upstream and midstream Appalachian assets. The company's focus is on the production, gathering, and transmission of natural gas in the Appalachian area and exploration for crude oil and natural gas liquids. And with its recent $1Billion share repurchase programme, earnings per share should increase. With a market cap of $15.83 billion and a monthly, 12-month trailing total return of 85.87%, EQT is a highflyer.
2. Coterra Energy Inc (CTRA)
This company is the child of the $17 billion merger between Cabot Oil & Gas Corporation and Cimarex Energy. The merger was approved by over 90% of the shareholders on both sides. Coterra Energy is engaged in oil and gas operations in the Marcellus Shale, Permian Basin and Anadarko Basin. And with exploration for oil set to boom during an economic expansion, Coterra Energy will likely continue to attract a lot of inflows. With a market cap of $23.4 billion and a monthly, 12-month trailing return of 52.02%, it has performed exceptionally well amongst its peers.
3. Antero Midstream Corp. (AM)
Antero Midstream Corporation owns, operates, and even develops midstream energy assets making it a necessity for the energy sector. It operates pipelines and compressor stations and water distribution and fractionation. Pipeline safety serves as a significant source of revenue as well. With a market cap of $5.4 billion and a monthly, 12-month trailing return of 30.34%, Antero could be a place to put money.
Why Invest in Oil Stocks Now
If you are looking to trade in an area that is closely followed, the oil sector is a great place to get started. The oil market has been striving to recover to the good-old demand of pre-pandemic days. The current environment suggests that oil markets and the supply-demand situation are changing rapidly.
Over the last few years, we have seen the selling of oil assets in general, mainly due to lacklustre economic momentum. This means that the oil markets and, by extension, the oil stocks offer a great way to benefit from any potential economic recovery. This recovery momentum is something that the world has been doing since the Great Financial Crisis and, more recently, the Covid pandemic. The better the outlook for the global economy, the better your oil company portfolio will perform.
Things to Know Before Investing in Oil Stocks
You need to understand that oil stocks have many crosscurrents going on simultaneously. The first and the most obvious thing to pay attention to is whether or not there is global growth. If we do not have strong global growth in the world's economy, crude oil is one of the first things to suffer because it is used in numerous parts of the worldwide supply chain. In other words, if we are trading and growing economically, then ships, trains, and tankers will all need fuel to move goods around the country and across the world.
It is also worth noting that there are various points, from extraction to marketing and investments in companies that cover the entire spectrum, which is probably one of the best ways to balance out an energy portfolio. There are ETF products out there that will allow you to pick out just a part of the process if you cannot do the fundamental research.
There is concern that the world must move away from fossil fuels, but the reality is very different from the hyperbole often heard. We are decades away from everyone driving an electric vehicle. Not to mention that petroleum is also needed to run power plants and provide electricity to a vast portion of the world. With those facts in mind, it is evident that oil remains crucial to the entire economic process.
How to Buy Oil Shares in the UK
1. Research Oil Companies
Initially, you will need to research the company you are looking to invest in. Earnings should be examined, and whether the company has a lot of viable products or whether they have energy fields in stable places. For example, the major field of a company that is an oil driller might be shut down due to political issues. That would cause significant problems with revenue. It would help if you also researched the potential demand for crude oil. You can use declining crude oil inventories that signal a rise in demand for petroleum.
2. Find a Broker
The broker you use will be crucial. However, there are just a handful of things you will need to pay attention to be successful. For example, the broker needs to be regulated, and of course, it needs to offer the necessary instruments and the markets you wish to trade. You could also take advantage of extras, so look around to find a suitable broker for your needs.
3. Open & Fund an Account
Opening an account is the next move and is roughly the same process no matter where you choose to trade. It typically involves proving who you are by verifying your identity and transferring a deposit to the company, often via bank transfer, eWallet, or a credit card.
4. Set Order Types
Make sure you understand the various order types available to you. For example, you need to understand whether or not a market order or a pending order makes the most sense. You also need to understand the various protective orders available to keep your account safe. The protection of your trading capital is crucial. Be sure to learn about these trading orders.
5. Select & Buy Oil Stocks
The next move is to select and buy the shares you want to invest. The markets have an almost endless number of possibilities, and therefore your research is crucial. The timeline that you are choosing is also vital. Make sure that you plan carefully and are not trading with a ‘spur of the moment' thought process.
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If you're ready to buy oil shares, you'll need to use an FCA-regulated broker with low trading commissions and a reliable trading platform. Finding one can be tricky, so we've hand-picked reliable brokers that tick all of the boxes to help you get started.
No matter what kind of experience you have, or if you are just looking to know more, the brokers mentioned above are perfect for your needs. All of them are regulated and therefore provide a safe and secure trading environment. Most of the brokers not only give your access to the markets but also offer a wide range of asset types to be involved with. Educational resources are plentiful and will be more than enough to get you started in an informed manner.
If you are looking to build your long-term wealth or just want to secure a nest egg for special events in your life, you need to be involved in multiple sectors that have longevity. Energy production, and by extension the oil industry, is an investment area that should see further growth in the years to come.
Although we are starting to see electric vehicles taking away some of the attraction of petroleum, the reality is that we are decades away from oil and associated products falling by the wayside. Because of that fact, we are much better off dealing with the ‘now' and not trying to speculate on where we will be in 50 years.
Energy is an important part of any portfolio, especially if you are banking on some sustained economic growth. Knowing the difference between the various types of energy stocks is a great place to start. Getting a solid education at some of the brokers mentioned is a good start to building a portfolio. While there are multiple ways to play the energy markets, in the end, as with most investments, it all comes down to economic growth.