Best Canadian Oil Stocks
With so much going on in the world today about inflation and conflict between Russia and Ukraine, man commodity stocks have boomed. For example, Brent Crude oil is up around 66% year-to-date. I can see why investors might be licking their chops. However, analysts believe Canada can quickly increase oil production. So, in this article I will examine a few Canadian oil stocks you may consider adding to your portfolio.
The price of oil, like any other commodity, is determined by supply and demand. On the supply side, a few things have caused oil prices to jump. The clearest cause is the Russia and Ukraine conflict. As readers may know, Russia is a giant exporter of oil.
Since invading Ukraine, Russia has been subject to a growing list of sanctions. These sanctions have come from NATO allies, companies that do business with Russia, and even the international banking industry.
Among these sanctions are bans on Russian oil exports. More countries and oil companies may join the sanctions in the coming months. For example, the U.S. has banned Russian oil imports altogether. The UK will be phasing them out by the end of the year. In addition, Shell said that it would no longer purchase oil from Russia.
Where Will Oil Come From?
The Organization of Petroleum Exporting Countries (OPEC) is a group of 13 of the leading oil-producing countries in the world. OPEC member countries are mainly in the Middle East. The alliance acts together and increases or decreases oil production in concert. Together, OPEC controls most of the world’s oil reserves and accounts for a large amount of the oil produced worldwide.
Even though the conflict has heated, OPEC has stated that it will stick to its production schedule. The schedule includes modest and gradual increases for the rest of the year.
Venezuela is another option to increase oil production. Unfortunately, the Venezuelan industry has worsened greatly from when it was an oil powerhouse years ago. Therefore, the country’s ability to produce enough oil to make a difference is in question. On top of that, Venezuela is already under U.S. oil sanctions. Those sanctions would have to be lifted if Venezuela became an option.
One concrete option is Canada. Canada can quickly increase oil production. In addition, Canadian oil stock companies typically have lower than average operating costs.
Keep reading for more on Canadian oil stocks.
Won’t Green Energy Reduce Demand For Fossil Fuels?
Not any time soon. According to a Forbes article, there is enough wind and solar energy to meet global electricity demand 100 times over. Unfortunately, estimates say that isn’t likely to happen until around 2035.
I’m sure readers know that oil is not used to make electricity. Oil companies use oil to produce petroleum. These companies use petroleum to make gas, diesel fuel, and jet fuel. The real risk to oil companies is electric cars.
This article from Car and Driver estimates that global new electric vehicle sales could rise from about 4% today to around 70%. Although, the 70% mark won’t be reached until 2040.
In the future, renewable energy may reduce greenhouse gases and reduce our dependence on fossil fuels. Until then, Canadian oil stocks may benefit from the current chaos in the oil industry.
Best Canadian Oil Stocks
Because much of the news about the current oil situation has already been read by investors, most Canadian oil stocks are up year-to-date. If you think there is room for oil prices to go higher, here are a few Canadian oil stocks to think about.
- Enbridge (NYSE: ENB): Enbridge is s midstream oil company. That means its business consists of moving oil through its pipes from refiners closer to the end-user. Enbridge earns sales when they move oil. If oil production goes up in Canada, Enbridge could benefit. In addition, the stock pays a dividend yield of over 6%.
- Canadian Natural Resources (NYSE: CNQ): Canadian Natural is one of the lowest-cost oil producers in Canada. Being low cost means that the company can earn more profit than other producers. Canadian Natural Resources is also a dividend payer. The stock’s dividend yield is currently around 4%.
- Suncor Energy (NYSE: SU): Suncor Energy is one of the biggest integrated companies in Canada. Being an integrated oil company means Suncor explores, produces, refines and transports its oil. Over the last twelve months, Suncor’s sales exceeded CA$38 billion. The stock also carries a dividend yield of about 4%.
Canadian Energy Stocks
Often, oil companies are also producers of other types of energy. One such energy is natural gas. Folks use natural gas to heat their homes. If you’ve read the headlines about inflation around the globe, you may be aware that heating costs have moved much higher. The market price for natural gas has almost doubled over the last year. If you’re more interested in other Canadian energy stocks, consider this one.
- Tourmaline Oil (TORONTO: TOU.TO): Don’t let the name fool you. Oil only accounts for a small portion of this Canadian oil stocks output. The company is one of the largest natural gas producers in Canada. It is also one of the lowest-cost producers of natural gas.
About BJ Cook
BJ Cook is a long-time stock nerd. He has held several roles in the equity research world and earned the right to use the CFA designation in 2014. When he’s not writing for Investment U, you can find him searching for new investment ideas. Outside the investment community, BJ is a die-hard Cubs fan.