Prices for crude oil have risen to their highest level in five months amid growing concerns of tighter supplies fueled by OPEC+ production cuts and turmoil in the Middle East. The price of Brent crude oil, the international standard, is currently at $90.19 per barrel, having risen more than 5% since the start of April. West Texas Intermediate (WTI) crude oil is trading at $86.14 a barrel, and back above the $85 mark for the first time since last fall. Both crude oil benchmarks posted a third consecutive month of gains in March.
Oil prices have increased ever since the Organization of the Petroleum Exporting Countries and its allies (OPEC+) extended production cuts to the end of June, a move that is expected to tighten crude oil supplies in coming months. At the same time, drone attacks from Ukraine have knocked out several Russian oil refineries, and China’s factory output rose in March for the first time in six months, supporting a stronger outlook for global demand. China is the world’s largest importer of crude oil.
The higher prices for crude oil and strong demand outlook make now a good time to buy oil and natural gas stocks. Here are Wall Street favorites: three oil and gas stocks with strong buy ratings for April 2024.
Diamondback Energy (FANG)
Diamondback Energy (NASDAQ:FANG) currently enjoys a “strong buy” recommendation among analysts. Of the 19 analysts offering price targets on FANG stock, 17 have a “buy” rating and two have a “hold.” There are no “sell” ratings on the company’s stock. Energy analysts have given a thumbs up to Diamondback Energy’s $26 billion cash-and-stock acquisition of privately held Endeavor Energy Partners, a deal that will strengthen Diamondback’s position in the oil rich Permian Basin of Texas.
Endeavor is the largest privately held oil and gas producer in the Permian Basin, with operations spanning 350,000 net acres in the Midland, Texas area that straddles West Texas and eastern New Mexico. The deal is the latest amid a wave of consolidation that is sweeping across the U.S. energy sector. However, analysts say the purchase of Endeavor Energy by Diamondback is one of the recent deals that makes the most sense. Once the deal is finalized, Diamondback should come out ahead, say industry experts.
The stock of Diamondback Energy has risen 30% year to date, mostly since the Endeavor Energy purchase was announced in February.
Shell (SHEL)
European oil giant Shell’s (NYSE:SHEL) stock also enjoys a “strong buy” rating. As with FANG, there are no “sell” recommendations on SHEL stock currently. The bullish outlook comes as Shell’s share price is up nearly 10% on the year, and after the company raised its quarterly dividend payment to shareholders by 4%. Shell is lifting its dividend payment to 65 cents per share from 62 cents previously, giving the stock a robust yield of 3.63%. Additionally, the oil major announced a new $3.5 billion share buyback program.
The latest stock buyback is to be carried out this spring. At the start of this year, Shell completed a $3.5 billion share buyback that was announced last November. The shareholder rewards were announced along with financial results that showed Shell posted earnings of $28.25 billion for all of 2023, which was better than the $27.50 billion in profits expected among analysts. The company said the results reflect strong liquefied natural gas trading, which offset weaker oil production.
SHEL stock has increased 17% over the past 12 months.
ConocoPhillips (COP)
Rounding out the oil and gas stocks with “strong buy” ratings is ConocoPhillips (NYSE:COP). The Houston-based company is one of America’s biggest oil producers with operations around the world, from Canada to Qatar. ConocoPhillips is also a major player in the field of hydrocarbon exploration. COP stock has been a strong performer, having gained 25% in the last 12 months, including a 13% gain this year. Strong financial results and a commitment to shareholders have the share price moving in the right direction.
Late last year, ConocoPhillips raised its quarterly dividend payment by 14% after reporting a bigger-than-expected profit. The dividend currently stands at $1.05 per share each quarter, giving the stock a yield of 3.15%. ConocoPhillips has a reputation for returning excess cash to shareholders. In 2023, the company returned half its cash flow of $11 billion to stockholders, which is proportionately higher than larger oil companies such as Chevron (NYSE:CVX).
On the date of publication, Joel Baglole 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.