Although soaring gasoline prices represented one of the signature pain points of the year so far, the crippling inflation rate has finally seeped into the hydrocarbon energy sector’s demand profile, thus leading to unusual weakness in pricing. Nevertheless, this favorable dynamic for consumers may not last that long — thus inviting a look at oil stocks to buy on the dip.
Primarily, the travel sector has been one of the surprising sectors to flourish despite the pain of inflation. For instance, the Fourth of July weekend drove airport traffic to a pandemic high. And while recent data shows that rising prices are finally hitting consumers in the wallet, a full normalization of society could boost the case for oil stocks to buy on the dip.
Second, investors should consider travel demand to Asia. Due to strict coronavirus mitigation policies, Far East Asia remains an unattractive proposition for international tourists. However, once the pandemic fades away or if government agencies decide the economic pain is not worth the restrictions, travel demand to the region will likely boon.
Murphy USA gas station and convenience store located on an out parcel of a Walmart Supercenter
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An operator of a chain of retail gasoline stations, Murphy USA (NYSE:MUSA) is an integral component of the U.S. energy infrastructure. Typically located near Walmart (NYSE:WMT) stores, Murphy USA has the advantage of appealing to more price-sensitive consumers. However, such details are relatively moot when you consider the necessity of the underlying product.
Not surprisingly, MUSA stock gained nearly 43% on a year-to-date (or YTD) basis. However, it did encounter some weakness in early June. Still, the current softness opens the door for MUSA as one of the oil stocks to buy on the dip.
Mainly, the trend for vehicle miles traveled points in a positive direction for Murphy USA. While it might not repeat the outstanding growth figures of the second quarter of 2022, the company is poised to deliver strong profitability due to the elevated crude oil baseline.
Exxon Mobil (XOM)
A view of a well-lit Exxon Mobil gas station in Pasadena, CA during nighttime. representing exxon mobil stock
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Diversified hydrocarbon energy giant Exxon Mobil (NYSE:XOM) has been on a see-saw ride throughout the new normal. Initially, the demand destruction that the Covid-19 crisis caused saw XOM stock plunge worryingly into the abyss. However, the anticipation of a recovery — followed by Russia’s invasion of Ukraine — saw shares rise to multi-year highs.
Now, a range of factors including economic — many households driving less to save money — and monetary — the U.S. dollar is stronger compared to other currencies — have contributed to yet another headwind for petroleum products. In turn, over the trailing month, XOM is up more than 6%. Still, this discount may be the signal for oil stocks to buy on the dip.
With Exxon specifically, the company’s solid strengths in the balance sheet and across multiple profitability metrics make it attractive. As well, its diversified business should help XOM, especially as natural gas demand soars amid an international heatwave.
Lastly, Exxon reported its Q2 earnings results on Friday. And with shares up more than 4% on the day, it’s clear investors are happy with the news.
Oil Stocks to Buy on the Dip: Shell (SHEL)
logo on a gas station in Iceland.
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While virtually oil stocks to buy on the dip suffered from Russia’s military aggression in Ukraine, Shell (NYSE:SHEL) absorbed a direct impact. Following the invasion, Shell’s management team announced that it would exit the Sakhalin-2 project (located in Russia’s east Asian corridor). However, the New York Times reported at the beginning of July that Russia moved to seize the venture, which also involves two major Japanese companies.
Naturally, over the trailing month, SHEL stock finds itself about flat. Furthermore, brewing concerns about a global recession has many investors spooked about Shell. Still, the company could make for one of the oil stocks to buy on the dip.
Primarily, Shell despite its recent woes is extraordinary relevant. Aside from its diversified oil and gas business, Shell aims to build Europe’s largest renewable energy hydrogen plant. So, with an eye on the future of energy, SHEL stock makes for an interesting long-term proposition.
Devon Energy (DVN)
An image of a hand holding a smartphone displaying the Devon Energy Corporation logo in front of a computer screen
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As one of the largest independent oil and gas firms, Devon Energy (NYSE:DVN) is well positioned to benefit from political undertones. With the national average price of gasoline still sky high, many Americans continue to be up in arms about the exorbitant rate. In turn, many have called for increased domestic output, which of course clashes with the Biden administration’s goals for net-zero emissions.
As a Wall Street Journal op-ed explained, oil firms like Devon are worried that as they fork over the money for the investments necessary to ramp up infrastructure, President Biden and the Democrats may introduce anti-hydrocarbon-energy legislation as soon as the current oil crisis is over. Still, the thing is that Democrats may lose the upcoming midterm elections, in part because of high oil prices.
With Republicans in control, companies like Devon may flourish. Therefore, DVN is one of the oil stocks to buy on the dip.
Oil Stocks to Buy on the Dip: Marathon Oil (MRO)
Marathon Oil gas station carport on sunny day with blue sky background
Source: Jonathan Weiss/shutterstock.com
As another big player in the independent oil and gas arena, Marathon Oil (NYSE:MRO) also benefits from renewed interest in domestic resource production. The reason for investors to be excited about MRO stock is the popularity — or lack thereof — of President Biden.
According to a Morning Consult report, net approval rating for the current POTUS is underwater in 44 states. Interestingly, “Biden is generally more popular among Democrats who identify as liberal than among Democrats who identify as moderate or conservative.” But with Americans generally politically moderate, appealing to the extremes of the spectrum is not particularly helpful.
Therefore, a transition in power appears likely, both at the end of the midterms and the 2024 presidential election. And with hydrocarbon-energy-friendly Republicans seemingly poised to take control of the government, MRO may be one of the oil stocks to buy on the dip.
Occidental Petroleum (OXY)
A magnifying glass zooms in on the Occidental Petroleum website.
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Since the beginning of the year, Occidental Petroleum (NYSE:OXY) has impressed investors with a gain of more than 125%. Of course, since the beginning of June, shares are down more than 5%. Therefore, OXY may not be a resounding idea among oil stocks to buy on the dip. Still, it’s a relevant one.
Primarily, the company is a hydrocarbon exploration firm, with projects in the U.S., Canada, Chile and the U.S. In addition, Occidental features a very compelling midstream portfolio, which is crucial for the stability of transportation infrastructures.
While the company may not have the greatest strengths on its balance sheet, it’s a solidly profitable enterprise. For instance, Occidental’s net margin of 25.3% is well above the industry median’s 3.4%. Furthermore, the independent oil and gas firm’s return on equity of 32.3% is ranked higher than nearly 87% of its competitors.
Oil Stocks to Buy on the Dip: Matador Resources (MTDR)
Image of an oil filed at the Permian Basin.
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With the unique dynamics of the post-COVID world driving up the energy sector, it’s difficult to find oil stocks to buy on the dip that are deeply in negative territory. Still, for those that want to gamble on higher-risk, higher-reward ideas, Matador Resources (NYSE:MTDR) may be an interesting wager.
On June 7, MTDR closed at a price of $66.56. Since then, though, shares have tumbled around 14%, making for a significant relative discount. Moreover, inflationary pressures on the consumer economy along with actions such as the release of crude oil from the Strategic Petroleum Reserve recently contributed to weakness in energy prices.
Still, once society normalizes — which may include a return to the office — demand could again skyrocket.
In the event that it does, MTDR could rise higher than other oil stocks to buy on the dip. Mainly, this has to do with its smaller capitalization. Still, don’t assume that small cap necessarily means speculative. Matador features many strengths in its financials, including very strong profitability metrics.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
