The worldwide oil industry took a big hit in 2020. The COVID-19 pandemic led to a global recession and the demand for oil collapsed. This created one of the most spectacular financial charts ever seen when the price of oil went negative.
When the crude oil futures contracts went below zero in April 2020, the world's top producers got together and cut the supply. It seemed clear to everyone that we would see a gradual recovery rather than a V-shaped one.
Fast-forward one year and the oil industry shows signs of life. The price of oil is back to where it was in 2019 and rising. It may be time to get back into oil, so here we present the best oil shares to buy in 2021.
Overview of the Oil Companies
All the oil companies that made our top ten list of oil companies to buy in 2021 have strong financial positions despite the decline in the demand during the pandemic.
Despite increased efforts from governments and institutions to push toward green reforms due to climate change, oil is still the biggest component of the energy mix and favored by hedge funds. Most of the companies presented here are dividend-paying companies that also run major campaigns to invest in a greener future.
Where Can I Buy Oil Shares?
Trading in common shares is done through brokers. For a small fee for their services, the broker intermediates the transactions between buyers and sellers of shares.
What Are the Trading Hours for Oil Shares?
Most of these companies are listed on the major stock exchanges in the United States, which means that regular US trading hours are the best time to buy oil shares.
How to Trade And Invest in Oil Shares?
Open a Trading Account with a Broker
Sign up for an online share dealing account within a few minutes or a few days, depending on the stockbroker and type of account. You can usually deposit your investment funds easily via debit card, bank transfer, or sometimes even PayPal.
Select Your Oil Shares
Most brokers display categorised lists of the stocks you can buy, and these lists can usually be searched or filtered, so it should be easy to find the stock you want.
Place a Trade
Buy the stock immediately at the quoted price or place an order inside or outside market hours to buy the stock at the best available price (“at best”) or at a maximum price (“limit order”) when the market is open.
Top 10 Oil Shares to Buy
We have identified these top ten oil shares to buy in 2021 based on their financial strength and future growth perspectives:
- Exxon Mobil Corporation
- EOG Resources
- Royal Dutch Shell
- Occidental Petroleum
1. Exxon Mobil Corporation
A Texas-based corporation from the United States, Exxon Mobil made headlines when it was dropped from the S&P 500 index to make room for Tesla. The company, which runs a worldwide business in the integrated oil and natural gas industry, has proven reserves of over $22 billion oil-equivalent barrels and employs over 70k people.
- Market capitalization: $220.54 billion (at the time of writing)
- Helped by the recent rally in the crude and Brent oil prices
- Listed on the New York Stock Exchange under the ticker XOM
- Dividend-paying company
- Healthy cash flow
A Norwegian company from Stavanger, Equinor is involved in everything oil-related. It transports, refines, and markets petroleum-derived products all over the world. It is also involved in drilling, exploration, and transportation of oil and gas all over the world. Equinor has been in business since 1972 and it employs more than 21k people.
- Market capitalization: $60.31 billion (at the time of writing)
- Took a huge write-down (close to $1 billion) on a Tanzanian liquid natural gas (LNG) project.
- Listed on the New York Stock Exchange under the ticker EQNR
- Exited the Canadian oil sands business
3. EOG Resources
From Houston, Texas, EOG Resources employs close to 3k people and is an active player in the oil and gas exploration and production industry. Although challenges in the energy sector did affect the company, it continues to deliver solid gross profit margins.
- Market capitalization: $34.66 billion (at the time of writing)
- The rally in oil prices helped all energy companies
- Listed on the New York Stock Exchange under the ticker EOG
4. Royal Dutch Shell
Headquartered in The Hague, the Netherlands, Royal Dutch Shell operates worldwide and is one of the most active players in the integrated oil and gas industry. It markets and trades carbon emission rights, crude oil, electricity, and more. It runs a huge business, employing over 80k people all over the world.
- Market capitalization: $143.99 billion (at the time of writing)
- A dividend-paying company for the last 15 years
- A-class shares listed on the New York Stock Exchange under the ticker RDS.A
- Shares fell during the March 2020 meltdown and then recovered some of the losses
A Chinese company from Shanghai, Sinopec’s main business activity is in the commodity chemicals industry, the materials sector. However, it also sells petrochemical and petroleum products, as well as produces various fuels, such as liquified petroleum gas or jet fuel and heavy oil.
- Market capitalization: $4.86 billion (at the time of writing)
- Listed on the New York Stock Exchange under the ticker SHI
- The share price fell from a peak in 2018 and started to recover between 2020 and 2021
Expert Tip On Investing in Oil Shares“ Oil shares correlate with the price of oil, so if the price of oil is in a rising trend, this will be reflected in the oil companies’ earnings in the period ahead. ”- Mircea Vasiu
Why Invest in Oil Shares?
Oil still represents the biggest component in the energy mix. As world economies recover from the pandemic, oil demand will likely pick up and the oil price will rise. One of the best bits is that most of the oil companies listed here pay dividends.
Frequently Asked Questions
The #1 oil stock is Royal Dutch Shell. With over 80k employees all over the world and one of the largest market capitalizations in the industry, it survived for decades in an increasingly challenging environment.
The price of oil bounced from negative territory in 2020 (i.e., the futures contract on the WTI crude oil price settled close to -$40 in April 2020) to $60 subsequently. The higher the oil price, the better for the oil companies.
Chevron is the strongest oil company financially. It has a solid balance sheet with a diversified business model and access to cash and cash equivalents.
Invest in oil if you’re looking for a steady dividend and believe that the pandemic will end soon so that increased demand leads to a higher oil price.
The Schlumberger share price doubled after the March 2020 market crash and the company announced that it tapped Lambert to lead in a hydrogen production venture.
The pandemic hit the oil industry hard, but it was already in decline as green efforts from governments and institutions as well as pressure from the population to act against climate change affected the business model too. However, fossil fuels account for the largest share in the energy complex demand, so oil is here to stay for quite some time.