Saudi Aramco – the world’s largest oil producer – has issued a dire warning of “extremely low” capacity. Here are 3 stocks for protection

'The world should be concerned': Saudi Aramco - the world's largest oil producer - has issued a dire warning about 'extremely low' capacity.  Here are 3 stocks for protection

‘The world should be concerned’: Saudi Aramco – the world’s largest oil producer – has issued a dire warning about ‘extremely low’ capacity. Here are 3 stocks for protection

The world oil market remains tight according to Saudi Aramco, the largest oil producer in the world. And that doesn’t bode well for a world still heavily dependent on fossil fuels.

“Today there is extremely low spare capacity,” said Saudi Aramco CEO Amin Nasser at a conference in London. “If China opens up, [the] economy starts to improve or the airline industry starts asking for more jet fuel, you will erode this spare capacity.

Nasser warns that oil prices could rise again soon.

“If you eroded that spare capacity, the world should be concerned. There will be no room for any hiccups – no interruptions, no unforeseen events anywhere in the world.”

If you share Nasser’s view, here are three oil stocks to bet on. Wall Street also sees benefits in this trio.

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Shell

Shell (NYSE:SHEL), headquartered in London, is a multinational energy giant with operations in more than 70 countries. It produces about 3.2 barrels of oil equivalent per day, has stakes in 10 refineries and sold 64.2 million tons of liquefied natural gas last year.

It is also a staple for global investors. Shell is listed on the London Stock Exchange, Euronext Amsterdam and the New York Stock Exchange.

Shares of the company, listed on the NYSE, are up 26% year-to-date.

Piper Sandler analyst Ryan Todd sees an opportunity in the oil and gas supermajor. Last week, the analyst reiterated an overweight rating for Shell while raising his price target from $65 to $71.

Given that Shell is trading at around $56 a share today, Todd’s new price target implies a potential upside of 27%.

Chevron

Chevron (NYSE:CVX) is another oil and gas supermajor benefiting from the commodity boom.

For the third quarter, the company reported earnings of $11.2 billion, an 84% increase over the same period last year. Sales and other operating income were $64 billion for the quarter, up 49% year over year.

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In January, Chevron’s board of directors approved a 6% quarterly dividend increase to $1.42 per share. This gives the company an annual dividend yield of 3.0%.

The stock has also had a nice rally, rising 57% in 2022.

Morgan Stanley analyst Devin McDermott has an equal weight rating on Chevron (not the most bullish rating), but raised the price target from $193 to $196 last month. That implies a potential increase of 4% from current levels.

Exxon Mobil

With a market cap of more than $460 billion, Exxon Mobil (NYSE:XOM) is larger than Shell and Chevron.

The company also boasts the strongest stock price performance of the three in 2022 — Exxon shares are up 79% year-to-date.

It’s not hard to see why investors love the stock: The oil-producing giant is gushing profits and cash flow in this commodity price environment. In the first nine months of 2022, Exxon earned $43.0 billion in profit, a huge increase from $14.2 billion in the same period a year ago. Free cash flow was $49.8 billion for the first nine months, compared to $22.9 billion in the same period last year.

Solid financials enable the company to return money to investors. Exxon pays quarterly dividends of 91 cents per share, which translates to an annual return of 3.2%.

Jefferies analyst Lloyd Byrne has a buy rating on Exxon and a price target of $133, about 17% above the current price target.

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This article provides information only and should not be taken as advice. It comes without any kind of warranty.

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