Currently, two major conditions are converging to continue the strong performance of energy stocks in 2024. Chief among high-performance energy stocks are those in the oil sector which currently adhere to geopolitical shifts. Now more than ever, this is driving increased speculation on which global oil stocks to buy.
The first factor is the degradation of stability in the Middle East due to recent hostilities between Israel and Hamas. This conflict has spilled into a wider crisis, perpetuated by Iran and the non-state actors it sponsors, such as the Houthis and Hezbollah. While some signs of de-escalation are emerging, critical oil extraction sites and shipping routes could become increasingly jeopardized.
Any further decrease in stability or productivity could drive crude oil prices up again, or companies outside of the region may pick up the slack eventually. As a result, several strategically placed and geographically diversified oil companies could see their share values rise. Here are three companies in the oil sector with the right combination of assets and revenue to weather and profit from the current situation.
Scorpio Tankers (STNG)
For Western economies, a substantial aspect of the oil supply chain is shipping, which is where Scorpio Tankers (NYSE:STNG) excels. In 2017, the company established itself as one of the world’s largest tanker companies through a merger with Navi8 Tankers. Due to this, STNG stock value has grown by 180% over the last five years, outperforming the market average consistently.
The company managed to deliver this stellar performance despite production constraints and a shrinking shipping market due to the pandemic. Furthermore, STNG has provided assurances and data regarding the cost of rerouting tankers across the Cape of Good Hope. This comes as the Red Sea continues to receive pressure from Iran-backed Houthis in Yemen.
With these strategic decisions, STNG has provided investors with quarterly dividend increases since Q4 2022, rising 400% from 10 cents to 40 cents per share. Thus, the stock represents one of the more stable long-term investments in the oil industry today.
Schlumberger (SLB)
With over 400 active offshore oil rigs, Schlumberger (NYSE:SLB) has constructed a durable extraction business model despite global uncertainties. Even more enticing about SLB is that 85% of its financial investment decisions have breakeven points of $50 per barrel. This savvy FID distribution has allowed the company to sustain profit margin growth of 1.66% year-over-year in Q1 of 2024.
With $8.7 billion in revenue for the quarter, SLB has benefited from strengthening crude oil prices. While it’s impossible to predict oil prices, they may still grow should Iran or other OPEC countries cut production.
Thus, such a well-diversified company like SLB could see its margins grow even thicker as it steps in to fill a production cut. Ultimately, SLB represents one of the best global oil stocks to buy thanks to its business model and investing strategies.
Baker Hughes (BKR)
I recommended Baker Hughes (NASDAQ:BKR) earlier this month, should fracking regulations change in the U.S. this November. Currently, due to potentially worsening relations between Israel and Iran, I’ve decided to double down on my recommendation. That’s because the company’s core crude oil offerings are dedicated to maximizing extraction efficiency while lowering costs.
Technologies such as pipeline drag reducers and H2S scavengers have helped diversify the company’s revenue beyond fracking support. This has led to the company beating expectations for revenue and earning per share growth this quarter. Thus, Baker Hughes remains critical to extraction companies seeking to broaden their margins even further beyond rising oil prices.
Furthermore, with the higher trading price of oil, many of BKR’s prime customers are more flush with cash to invest in optimization technologies. Thanks to this, the company booked $239 million in new orders in the first quarter of 2024. What’s more impressive is the fact that the company’s performance remains stable despite policy shifts and economic conditions.
On the date of publication, Viktor Zarev 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.