Three Favorite Plays on Rising Oil Prices

01/26/2018 5:00 am EST

Focus: ENERGY

Jim Powell

Principal Analyst, Global Changes & Opportunities

Energy is at the top of the list of companies that are experiencing better economic conditions. After crashing from $147 a barrel in 2008 , to a low of just $30 in 2016, oil has been inching its way back up and the long-term trend seems well established, explains Jim Powell, editor of Global Changes & Opportunities Report.

Meanwhile, there is a dangerous confrontation occurring between Saudi Arabia and Iran. If it gets out of hand, it will have serious repercussions for the global economy.

If any disruption should occur to the world’s supply of Middle Eastern oil, our two leading North American energy producers — ExxonMobil (XOM) and Diamond Offshore Drilling (DO) — should do especially well. Both are in excellent positions to benefit from recovering oil prices — and are already doing so.

Diamond Offshore made the biggest gains, but ExxonMobil was close behind. Despite their recent upturns, XOM and DO have come back from such low levels that I’m continuing to recommend them. I think both stocks will at least double for long-term investors.

I also like the outlook for Suncor Energy (SU), a secure energy stock that should deliver top returns come what may. The Canadian company pioneered the first commercial oil sand technology in 1967 and is now the world’s leading oil sand processor.

Along with America's shale oil producers, Suncor is largely responsible for America’s growing energy strength. The company also produces some natural gas, it has an investment in five wind power projects, and it owns an ethanol plant.

With oil now selling for over $60 a barrel, the company can be profitable again. In fact, at Suncor’s breakeven point of approximately $56 a barrel, every extra barrel the company produced started to go directly to profits. If oil goes higher, as I expect, Suncor should go up by an even greater percent.

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