Summary:
- The annual inflation rate in the U.S. soared to 7.5% in January 2022, hitting a 40-Year high
- Brent crude oil is within striking distance of $100 a barrel
- Low inventory, supply constraints supporting higher crude oil prices
- Heightened geo-political tensions between Russia and USA, could put pressure on U.S. oil supply
The annual inflation rate in the U.S. has recently soared to 7.5% in January 2022. As the U.S. The Federal Reserve continued its easy-money policies during the pandemic, the housing market and other goods have ballooned in price. So, you might be wondering, what are the best oil stocks to buy in 2022?
During the pandemic, inflationary pressures caused the commodity market to soar. From steel, to lumber, to plastic, to oil and natural gas, prices have risen almost anywhere you look. More importantly, oil prices have risen steadily since the start of the pandemic in 2020.
According to AAA, the average price for gas paid at the pump in the U.S. is $3.53 a gallon. Low inventory, supply constraints and rising geo-political tension across the globe are set to support higher oil prices. Below we will present our best oil stocks to buy for 2022!
Best Oil Stocks for 2022 List:
- Exxon Mobil (NYSE: XOM)
- Chevron Corporation (NYSE: CVX)
- ConocoPhillips (NYSE: COP)
Exxon Mobil (NYSE: XOM)
Exxon Mobil is currently the largest oil and gas corporation in the United States. It is the largest descendant of John D. Rockefeller’s Standard Oil. Then formed in November 1999, when the two companies Exxon and Mobil merged. Does this make Exxon among the best oil stocks to buy in 2022? Let’s take a look.
Headquartered in Irving, Texas, Exxon Mobil employs more than 70,000 people.
Market Cap: $326.02 Billion
Price to Earnings Ratio (P/E): 14.30
Dividend Yield: 4.57%
Fourth Quarter 2021 Earnings Highlights:
- Earnings Per Share (EPS), was $2.05 vs. $1.93 expected
- Revenue was $84.97 billion, vs. $91.85 billion expected
- Initiated $10 billion share repurchase program
- Strengthened balance sheet, reducing debt liabilities by $20 billion
Exxon Mobil is the largest oil company in the U.S. and continues to strengthen its footing in the industry. In the latest quarter, Exxon generated $48 in operating cash flow, its highest level since 2012. This was off the back of oil supply constraints, which has led to oil prices surging 17% in January 2022.
Exxon Mobil initiated a $10 billion share repurchase program with plans to restructure its chemicals and refinery business. Additionally, they announced the move of their corporate headquarters to Houston, Texas. So is Exxon Mobil the best oil stock to buy in 2022? As the company strengthens their balance sheet and oil prices continue to rise, this could significantly help fuel the company’s growth and free-cash-flow in 2022.
Chevron Corporation (NYSE: CVX)
Chevron Corporation is an American multinational energy company. They are currently the second largest oil and gas company in the United States. Chevron is also a descendent of John D. Rockefeller’s Standard Oil.
Headquartered in San Ramon, California, Chevron employs more than 45,000 people.
Market Cap: $260.67 Billion
Price to Earnings Ratio (P/E): 16.62
Dividend Yield: 4.20%
Fourth Quarter 2021 Earnings Highlights:
- Earnings Per Share (EPS), was $2.56 vs. $3.16 expected
- Revenue was $48.13 billion vs. $45.69 billion expected
- Saw record free-cash-flow of $21.1 billion
- Strengthened balance sheet, reducing debt liabilities by $12.9 billion
Chevron Corporation is a great oil stock for 2022. They are engaged in every aspect of oil and natural gas ranging from hydrocarbons, oil refinery, marketing & transport, chemical manufacturing and power generation.
During the first week of February 2022, Brent Crude Oil topped $90.00 per barrel for the first time since October 2014. Prices are now closing in on $100.00 per barrel. Rising demand, supply constraints, and geo-political tensions could support higher oil prices in the months ahead. With increased uncertainty around inflation and rising interest rates in March, Chevron could be a great safe haven bid if oil prices continue to rise. Furthermore, Chevron’s dividend yield of 4.20% is very attractive for investors seeking passive income during market volatility. As a result, this Chevron one of the best oil stocks to buy in 2022.
ConocoPhillips (NYSE: COP)
ConocoPhillips is an American multinational energy company. They are the third largest oil and gas company in the United States. ConocoPhillips engages in the exploration and production of crude oil and natural gas.
ConocoPhillips is headquartered in Houston, Texas and employs more than 9,900 people.
Market Cap: $115.18 Billion
Price to Earnings Ratio (P/E): 14.59
Dividend Yield: 2.07%
Fourth Quarter 2021 Earnings Highlights:
- Earnings Per Share (EPS), was $2.56 vs. $3.16 expected
- Revenue was $48.13 billion vs. $45.69 billion expected
- Saw record free-cash-flow of $21.1 billion
- Strengthened balance sheet, reducing debt liabilities by $12.9 billion
ConocoPhillips stock has more than doubled since the start of 2021. Thanks to higher Brent crude oil prices, low supply costs, and strengthened business prospects. In January 2021, they announced the closing of the acquisition of Concho Resources.
During the fourth quarter of 2021, ConocoPhillips reduced debt liabilities by $12.9 billion. In addition, they achieved a 14% Return on Capital (ROC), generated $17 billion in cash from operations, while returning $6 billion to shareholders.
With rising geopolitical tensions in Russia and Ukraine, this could lead to oil prices pushing higher over the coming months. Russia being the third largest oil producer in the world, U.S. oil producers will have to meet this pent up demand. As a result, ConocoPhillips remains a top oil stock to watch for 2022.
Best Oil Stocks for 2022 Takeaway
Over the past 12 months, inflation has soared across the globe. However, inflation has been quite persistent in major Western economies like Canada, Australia and the United States. With inflation driving up the price of oil, investors have been on the look for the best oil stocks to buy for 2022.
Annual inflation in the U.S. hit a 40-year high, 7.5% in January 2022. Large corporations have chosen the route to pass rising costs onto consumers. Higher oil prices are great for oil companies, but not for the average, everyday consumer.
In January 2022, Brent crude oil was up 17%. On February 10th 2022, OPEC hinted at global demand for oil returning to pre-pandemic levels in Q3 2022. In its latest Monthly Oil Market Report, OPEC researchers predicted global demand would rise by 4.15 million b/d, and that consumption would exceed 100 million b/d. Also, if geo-political tensions continue to rise between Russia and Ukraine, this could bring even more panic to the market, pushing oil prices even higher. In conclusion, this could be just the start of oil’s next big move to the upside in 2022.
Disclosure: The author holds no position in ExxonMobil Corporation, Chevron Corporation, or ConocoPhillips Company. Freedom Stocks has a disclosure policy.
