Oil jumped on January 29 after an Iran-backed militia’s drone strike in northeast Jordan killed three US troops, an event that could worsen the already boiling tensions in the Middle East. But will these latest tensions affect oil stocks like Exxon Mobil Corp (NYSE:XOM), Occidental Petroleum Corp (NYSE:OXY) and Chevron Corporation (NYSE:CVX) in 2024? Industry experts were anticipating a continued slowdown in oil prices in 2024 amid a weaker global economic growth. Latest data from the International Energy Agency said that oil demand in 2024 is expected to come in at 1.2 million barrels a day, down from 2.3 million barrels a day last year. Oil demand started to decline in the last quarter of 2023 following a decline in travel demand in China. Part of the reason why oil prices will remain subdued in 2024 is an oil supply surplus expected in the year, driven by record high supplies from the U.S., Brazil and Guyana, along with production increases from countries outside of OPEC+. Despite this, investors have a lot of to gain from the oil and gas industry as the world's economic growth and output is set to come back to normal in the long term. Paul Sankey from Sankey Research recently said while talking to CNBC that while attacks on oil tankers and ships in the Red sea did not cause a rise in oil prices, the fact that WTI crude oil was hovering in the range of $70s shows that prices are not that low and if WTI goes near $75 we are going to see "very good cash returns" from oil companies this year.
Sankey referred to BP CEO who said that the company was using $60 per barrel as its base price for estimates and planning. Sankey said $60 per barrel is the "working number" for the industry and if oil price goes below this number only then it'd be worrying for the energy companies.
For this article we scanned Insider Monkey's database of 910 hedge funds and picked 12 oil stocks with the highest number of hedge funds. Why hedge funds? Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
Headquartered in Switzerland, American drilling company Transocean LTD (NYSE:RIG) is one of the best oil stocks to buy for 2024 according to hedge fund investors.
A total of 47 hedge funds tracked by Insider Monkey were long Transocean LTD (NYSE:RIG) as of the end of the September quarter.
In November 2023, BofA published a list of stocks that had underperformed but the bank said these companies had the potential to gain value in the future. Transocean LTD (NYSE:RIG) was part of this list of stocks.
In addition to RIG, hedge funds also love Exxon Mobil Corp (NYSE:XOM), Occidental Petroleum Corp (NYSE:OXY) and Chevron Corporation (NYSE:CVX).
Number of Hedge Fund Investors: 48
Oil and gas drilling services company Noble Corporation PLC (NYSE:NE) ranks 11th in our list of the best oil stocks to buy for 2024 according to hedge funds.
As of the end of the third quarter of 2023, 48 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Noble Corporation PLC (NYSE:NE). The biggest stakeholder of Noble Corporation PLC (NYSE:NE) during this period was William B. Gray's Orbis Investment Management which owns a $178 million stake in Noble Corporation PLC (NYSE:NE).
Carillon Scout Mid Cap Fund made the following comment about Noble Corporation Plc (NYSE:NE) in its Q3 2023 investor letter:
“Noble Corporation Plc (NYSE:NE), an offshore contract driller, benefited from improved sentiment regarding the offshore drilling business as higher day rates, the all-in daily costs of renting a drilling rig, were reported across the industry. The supply and demand for offshore rigs has tightened considerably.”
Number of Hedge Fund Investors: 48
Offshore drilling contractor Valaris Ltd (NYSE:VAL) shares were spotted in 48 hedge fund portfolios as of the end of the September 2023 quarter.
Earlier this month Valaris Ltd (NYSE:VAL) said it secured a multi-year contract for one of its drillships with Petrobras (PBR) for work offshore Brazil, with a $519 million total contract value.
The company talked about guidance and future projects in its Q3 earnings call:
"We see continued opportunity in Brazil through 2024 and 2025, with three ongoing tenders across multiple operators and expect contract awards for some of the existing opportunities by year-end. We see further demand in Brazil coming to market in 2024 with commencements in 2025, with potential for up to five incremental additions to the fleet offshore Brazil. There’s a strong pipeline of opportunities in the Mediterranean and West Africa for work commencing in late 2024, 2025 and 2026, with approximately 17 requirements, more than half of which are likely to require incremental rigs. These include some multi-year opportunities that could help to increase demand for a limited supply of available rigs. While visible demand in the Gulf of Mexico is lower than in other areas of the Golden Triangle, we continue to see a constructive supply and demand picture in the region and expect future demand to keep the majority of rigs occupied."
Read the full earnings call transcript here.
Number of Hedge Fund Investors: 48
Petroleum refining and marketing company Marathon Petroleum Corp (NYSE:MPC) ranks ninth in our list of the best oil stocks to buy for 2024 according to hedge fund investors.
As of the end of the third quarter of 2023, 48 hedge funds out of the 910 funds were bullish on Marathon Petroleum Corp (NYSE:MPC) stock, as per Insider Monkey's database.
In December, Morgan Stanley picked a few stocks with high free cash flow, high earnings per share growth, and an overweight rating in its U.S. Equity Strategy report. Marathon Petroleum Corp (NYSE:MPC) was part of the list.
The company in its Q3 earnings all talked about its fourth quarter guidance:
"We expect crude throughput volumes of over 2.6 million barrels per day, representing utilization of 90%. Utilization is forecasted to be lower than third quarter levels due to turnaround activity having a higher impact on units in the fourth quarter. In the Gulf Coast, with respect to the Galveston Bay reformer, repairs have progressed as planned. We anticipate starting the unit back up in mid November. Production is expected to ramp over the next several weeks. And guidance anticipates returning to full operating rates by mid-December, following advanced turnaround activity. And as I mentioned earlier, during this outage, we plan to continue progressing and complete turnaround work that was previously scheduled for 2024.
Read the full earnings call transcript here.
Number of Hedge Fund Investors: 49
With a 3.9% dividend yield and a low PE ratio, Shell PLC (NYSE:SHEL) is one of the best oil stocks to buy for 2024 according to smart money investors. Of the 49 hedge funds that had stakes in the oil company as of the end of the September 2023 quarter, Ken Fisher's Fisher Asset Management had a $1.4 billion stake in Shell PLC (NYSE:SHEL).
Earlier this month, Redburn Atlantic issued a Buy rating on Shell PLC (NYSE:SHEL) stock
Number of Hedge Fund Investors: 52
Devon Energy Corp (NYSE:DVN) is one of the best high-yield dividend stocks in the oil and gas industry according to hedge fund investors. A total of 52 hedge funds tracked by Insider Monkey had stakes in Devon Energy Corp (NYSE:DVN). The biggest stakeholder of Devon Energy Corp (NYSE:DVN) was Donald Yacktman's Yacktman Asset Management which owns a $145 million stake in Devon Energy Corp (NYSE:DVN).
Earlier this month, BMO issued a list of stocks that underperformed in January but are expected to outperform for the rest of the year. Devon made it to the list.
Number of Hedge Fund Investors: 58
Crude oil and natural gas exploration company Hess Corp (NYSE:HES) is one of the best oil stocks to buy for 2024.
Insider Monkey's database of 910 hedge funds shows that 58 hedge funds had stakes in Hess Corp (NYSE:HES). The biggest stakeholder of Hess Corp (NYSE:HES) was Ben Jacobs' Anomaly Capital Management which owns an $184 million stake in Hess Corp (NYSE:HES).
Like Exxon Mobil Corp (NYSE:XOM), Occidental Petroleum Corp (NYSE:OXY) and Chevron Corporation (NYSE:CVX), Hess is one of the to oil stocks to buy according to hedge funds.
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Disclosure: None. 12 Best Oil Stocks to Buy for 2024 is originally published on Insider Monkey.
