Top Energy Stock for the Long Run in United States
The energy sector powers the global economy literally and figuratively. The rising prices of oil and natural gas makes this a great time to take a closer look at energy stocks, as countries reopen their economies and shift consumption to carbon-free sources of energy. To help you understand this key market sector, we’ve profiled the 10 largest energy companies by market capitalization so you can decide which are right for your investment portfolio.
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Top Energy Stock for the Long Run in United States
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What are energy stocks?
Energy stocks refer to companies associated with the exploration, production and distribution of energy sources like crude oil, natural gas, coal and renewable fuels. The energy sector is crucial to the global economy. Without energy, cars will not run, factories will not function, devices will not turn on and the world would come to a standstill. Today the energy sector is at a crossroads. Industry insiders are working on new solutions to lower the dependence on fossil fuels. Global warming and climate change concerns and the limited supply of fossil fuels are driving innovation in the sector.
Despite the leaps made over the years in the adoption of renewable power generation, our world still remains heavily dependent on oil, coal and natural gas. According to Enerdata, non-renewable sources made up about 72% of global electricity production in 2021. The International Energy Agency (IEA) classified the primary sources of energy as oil, gas, coal, renewables and nuclear. There were two energy companies in the CompaniesMarketCap’s list of the top 10 largest companies in the world by market capitalisation, as of 3 January. Middle East energy juggernaut Saudi Aramco was the world’s second largest company valued at $1.887trn. US-based Exxon Mobil (XOM) came in ninth at a market valuation of $454.24bn.
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Energy sector trends for 2023 and beyond
If you are looking for the best energy stocks to buy in 2023, you will need to be aware of ongoing trends and developments in the sector.
Global energy crisis
2022 was a year that saw energy prices surge to multi-year highs following Russia’s invasion of Ukraine. Crude oil prices rose to trade over the $100 per barrel mark as the West imposed economic sanctions on Russia, one of the world’s top three crude producers. he natural gas market saw supply disruptions with European countries affected the most due to their over-dependence on Russia for gas imports. The high fuel prices and tight supply resulted in a “shock to the system” that had “far-reaching implications for households, businesses and entire economies”, said the IEA. Unsurprisingly, energy producers dominated the list of the most profitable companies in the world, taking up five spots in the top 10 compiled by CompaniesMarketCap on 3 January 2023. Saudi Aramco was the highest earner in the world above tech giants Apple (AAPL), Microsoft (MSFT) and Google (GOOGL). Other energy companies on the list were New York-listed Equinor and Exxon Mobil (XOM), Anglo-Dutch energy major Shell (RDS) and Brazil’s Petrobras (PBR). Investors chased new-age technology stocks and overlooked the energy sector, which was in the middle of an expensive transition to renewables. In 2022, energy stocks outperformed broader markets despite high inflation and rising interest rates as elevated oil and gas prices helped these companies post record revenues and profits. Here we name some of the best energy stocks to watch and the energy sector outlook.
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What are energy stocks?
Energy stocks refer to companies associated with the exploration, production and distribution of energy sources like crude oil, natural gas, coal and renewable fuels. The energy sector is crucial to the global economy. Without energy, cars will not run, factories will not function, devices will not turn on and the world would come to a standstill. Today the energy sector is at a crossroads. Industry insiders are working on new solutions to lower the dependence on fossil fuels. Global warming and climate change concerns and the limited supply of fossil fuels are driving innovation in the sector. Despite the leaps made over the years in the adoption of renewable power generation, our world still remains heavily dependent on oil, coal and natural gas. According to Enerdata, non-renewable sources made up about 72% of global electricity production in 2021. The International Energy Agency (IEA) classified the primary sources of energy as oil, gas, coal, renewables and nuclear.
There were two energy companies in the CompaniesMarketCap’s list of the top 10 largest companies in the world by market capitalisation, as of 3 January. Middle East energy juggernaut Saudi Aramco was the world’s second largest company valued at $1.887trn. US-based Exxon Mobil (XOM) came in ninth at a market valuation of $454.24bn.
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Energy sector trends for 2023 and beyond
If you are looking for the best energy stocks to buy in 2023, you will need to be aware of ongoing trends and developments in the sector.
Global energy crisis
2022 was a year that saw energy prices surge to multi-year highs following Russia’s invasion of Ukraine. Crude oil prices rose to trade over the $100 per barrel mark as the West imposed economic sanctions on Russia, one of the world’s top three crude producers. The natural gas market saw supply disruptions with European countries affected the most due to their over-dependence on Russia for gas imports. The high fuel prices and tight supply resulted in a “shock to the system” that had “far-reaching implications for households, businesses and entire economies”, said the IEA. While consumers were the clear losers from the crisis, energy producers saw windfall profits in 2022. “High energy prices are causing a huge transfer of wealth from consumers to producers, back to the levels seen in 2014 for oil, but entirely unprecedented for natural gas.” Unsurprisingly, energy producers dominated the list of the most profitable companies in the world, taking up five spots in the top 10 compiled by CompaniesMarketCap on 3 January 2023. Saudi Aramco was the highest earner in the world above tech giants Apple (AAPL), Microsoft (MSFT) and Google (GOOGL). Other energy companies on the list were New York-listed Equinor and Exxon Mobil (XOM), Anglo-Dutch energy major Shell (RDS) and Brazil’s Petrobras (PBR).
Renewables sources of energy gain momentum
Over the years, governments have come together to push for a green energy transition. Over 196 nations adopted a legally binding international treaty on climate change called the Paris Agreement in 2015. The treaty aimed to “reach global peaking of greenhouse gas emissions as soon as possible to achieve a climate neutral world by mid-century”. Another significant deal for the energy sector was the European Green Deal signed in 2019 to lower greenhouse gas emissions by at least 55% by 2030 and to make Europe the first climate-neutral continent by 2050. There is pressure from governments, activists and shareholders on energy firms to transform their business away from fossil fuels that are considered “dirty”. As pointed out by ING:
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How to select energy stocks to buy?
When searching for the best energy stocks to watch in 2023, market participants can sort companies by the following criteria:
Market capitalisation
Market capitalisation or market cap in simple words is the market valuation of a company which can be calculated by the share price multiplied by the number of shares. It is the total dollar market value of the number of outstanding shares of a security. Companies gain high market valuations based on their financial health, future prospects and upbeat investor sentiment.
Revenue and earnings
The revenue and earnings of energy companies are heavily dependent on the state of energy prices during the reporting period. As mentioned earlier, energy producers saw record revenue and profits in 2022 following a surge in energy prices. Market participants looking to invest in top energy stocks should note that energy prices are volatile. Energy prices are dependent on global demand-supply dynamics. Leading oil-producing regions, like the US and OPEC+ nations, exert significant influence on energy prices.
List of top-performing energy stocks
In our top energy stocks list, we referred to the S&P 500 Energy Index. It consists of energy companies included in the US benchmark S&P 500 (US500). In 2022, all of the 23 components of the S&P 500 Energy posted yearly gains underscoring investor preference for energy stocks amid elevated crude oil and natural gas prices during the year. Here are the top energy companies from the S&P 500 Energy index based on their market performance over the last five years, as of 3 January 2023, compiled by Trading View.
Hess Corp (HES)- 195%; ConocoPhillips (COP) – 114%; Marathon Petroleum (MPC) – 76%; Marathon Oil (MRO) – 58%; Targa Resources (TRGP) – 50%; Devon Energy (DVN) – 47%; Chevron (CVX) – 42%; Valero Energy (VLO) – 37%; Exxon Mobil (XOM) – 31%; Pioneer Natural Resources (PXD) – 31%.
Best energy stocks by market performance
Note that past performance does not guarantee future returns.
| Name | Sell | Buy | 1D Chg, % | BuyersSellers | |
|---|---|---|---|---|---|
| HESHess Corp | 155.01 | 155.40 | +0.200% | 69%31% | |
| COPConocoPhillips | 119.99 | 120.32 | -1.420% | 85%15% | |
| MPCMarathon Petroleum | 126.65 | 127.06 | +0.910% | 75%25% | |
| MROMarathon Oil | 28.04 | 28.13 | +0.680% | 95%5% | |
| TRGPTarga Resources | 75.55 | 75.68 | -0.070% | 100%0% | |
| DVNDevon Energy | 65.65 | 65.86 | +1.500% | 94%6% | |
| CVXChevron | 180.47 | 180.86 | -0.160% | 90%10% | |
| VLOValero Energy Corp | 142.75 | 143.39 | +0.210% | 92%8% | |
| XOMExxon Mobil | 112.68 | 114.07 | -0.530% | 79%21% | |
| PXDPioneer Natural Resource | 241.36 | 241.61 | +0.870% | 100%0% |
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