Although geopolitics and brewing ideological directives (such as initiatives to combat climate change) cloud the longer-term trajectory of hydrocarbons, the reality is that investors can reasonably have confidence in the top oil stock predictions for 2023. Essentially, the underlying resources offer a mixture of infrastructural support and high energy density. Therefore, getting rid of fossil fuels likely won’t materialize soon.
Moreover, certain efforts to contain rising prices associated with hydrocarbons probably won’t work. As described by the Hoover Institution, University of Chicago economist Harold Demsetz stated that “using price controls to reduce inflation is like responding to cold weather in Winnipeg by breaking the thermometer. His point was that just as thermometers respond to temperature, prices are an indicator of underlying economic phenomena, namely supply and demand.”
In other words, breaking a thermometer won’t impact the temperature. In the same way, energy price caps probably won’t be effective. Therefore, investors can still reliably bank on the below oil stock predictions for 2023.
Exxon Mobil (XOM)
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One of the biggest energy companies in the world, Exxon Mobil (NYSE:XOM) ranks among the top oil stock predictions for 2023 due to overriding need. For instance, The Washington Post mentioned that employers will likely force their employees to return to the office. To make a long story short, employees no longer own the magnitude of leverage they did during the coronavirus pandemic.
By logical deduction, this narrative should increase traffic volume as the morning (and afternoon) commute returns to normal. Further, we could see a rise in traffic against pre-pandemic norms due to population increase and the number of fresh college graduates eager to make a great first impression. Frankly, you won’t make any impression at all if you’re phoning it in.
Currently, data from TipRanks reveals that analysts peg XOM stock as a consensus moderate buy. Out of 14 experts, eight rated it a buy, and the remaining six rated it a hold. With fundamental dynamics moving in a favorable direction, XOM is easily one of the top oil stock predictions for 2023.
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For a stable, well-rounded opportunity in the hydrocarbon space, it’s hard to overlook Chevron (NYSE:CVX). Along with its massive size – it features a market capitalization of nearly $346 billion – it’s also involved in every segment of the energy value chain: upstream (exploration and production), midstream (storage and transportation), and downstream (refining and marketing).
Better yet, investors see the wisdom in targeting CVX as one of the top oil stock predictions for 2023. For example, on a year-to-date basis, Chevron shares gained a bit over 44% of equity value. Further, TipRanks notes that sentiment among hedge funds currently pings as very positive. Since the fourth quarter of 2021, these institutional investors significantly built up their position in CVX.
According to Gurufocus.com’s proprietary calculations for fair market value, Chevron rates as a modestly undervalued investment. Notably, the company features a solid balance sheet, particularly with an equity-to-asset ratio of 0.61 times that ranks better than over 66% of the competition. Also, it’s a profitable enterprise, offering confidence for investors ahead of an ambiguous new year.
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A notable name among the top oil stock predictions for 2023, Enbridge (NYSE:ENB) plies its trade in the midstream component of the energy value chain. Enbridge operates the world’s longest and most complex crude oil and liquids transportation system.” This includes 17,809 miles of active crude pipeline across North America.
Unlike other players in the hydrocarbon space, Enbridge suffered a loss for the year thus far. Since the January opener, ENB dipped a hair over 1%. To be 100% clear, this performance rates far better than the benchmark S&P 500, which dropped over 20%; essentially, correction territory. Moving forward, Enbridge can potentially benefit from unavoidable infrastructural demand.
Also, two factors benefit ENB at the moment. First, hedge funds (or smart money) have been biding up Enbridge since Q1 2022. While it’s no guarantee that ENB will rise, it’s usually better to invest with the experts. Second, Wall Street analysts have a consensus moderate buy rating on the company.
Kinder Morgan (KMI)
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Another major player in the midstream component of the hydrocarbon industry, Kinder Morgan (NYSE:KMI) currently features a market cap of just under $40 billion. Per its website, the company is one of the largest energy infrastructure companies in North America. It owns an interest in or operates approximately 83,000 miles of pipelines and 141 terminals.
What makes KMI an attractive idea among the top oil stock predictions for 2023 centers on its dividend yield. Presently, the company offers a forward yield of 6.26%. This is significantly higher than the energy sector’s average yield of 4.24%. Also, Kinder Morgan features five years of consecutive dividend increases.
With its fundamental relevance to infrastructural resilience and integrity, the company enjoys bullish support from analysts. At the time of writing, Wall Street experts peg KMI as a consensus moderate buy. Among eight analysts, three of them rated it a buy, and five rated it a hold.
Phillips 66 (PSX)
Moving onto the downstream component of the value chain, we have Phillips 66 (NYSE:PSX). Headquartered in Houston, Texas, Phillips 66 carries a market cap of $49.2 billion. Since the beginning of this year, PSX gained nearly 33% of its equity value. Further, the back half of the year has been very supportive of the enterprise. In the trailing six months, PSX moved up 19%.
As mentioned earlier, one of the top oil stock predictions for 2023 is that traffic volume will increase. With major enterprises announcing layoffs, fewer people will have high-paying jobs. And bluntly speaking, nothing keeps entitled employees in line than the threat of the (proverbial) axe. Thus, you might see a wave of people giving up their work-from-home privileges so as to not stand out.
I’m not entirely clear if Wall Street analysts share some of my top oil stock predictions for 2023. Nevertheless, the experts do peg PSX as a consensus moderate buy. Among 11 analysts, eight of them rate it a buy while the remaining three rate it a hold.
Murphy USA (MUSA)
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Another major example of oil stock predictions for 2023 alluded to above is that energy price caps won’t work. Essentially, such punitive measures require cooperation among the penalized. However, what could end up happening is that energy traders refuse to play, causing supply crunches as a result. That would then skyrocket hydrocarbon prices, which cynically plays into the hands of Murphy USA (NYSE:MUSA).
A downstream specialist, Murphy USA markets its gasoline products as a budget-friendly enterprise (relatively speaking). Therefore, it strategically placed its physical locations near discount-oriented big-box retailers. In my opinion, it’s a brilliant move. Plus, with oil prices possibly primed to rise because of misguided policies, MUSA stands to benefit handsomely.
To be fair, a lot of folks believe that MUSA went too far ahead of itself. While shares gained nearly 45% YTD, in the trailing month, shares actually dipped 1%. As well, analysts aren’t exactly enthused with Murphy USA. However, an unexpected price surge can change this narrative very quickly and positively.
Kosmos Energy (KOS)
Since we’re on the subject of oil stock predictions for 2023, we might as well drop the big one: hydrocarbons will stay relevant not only next year but probably for the next few decades. Yes, I understand that many European policymakers began pivoting toward renewable energy infrastructure. Unfortunately, such a transition will take much time and money.
In the meantime, international policymakers can focus on what works and making contemporary energy sources more efficient. Therefore, upstream specialist Kosmos Energy (NYSE:KOS) enjoys significant relevancies. Admittedly, fossil fuels don’t rate very positively from an ideological standpoint. But again, hydrocarbons work. And it’s easier for them to work better than to create an entirely new energy paradigm.
To be 100% transparent, KOS presents huge risks – which is why I put it last on this list of oil stock predictions for 2023. That said, of the two analysts that cover Kosmos, both of them rate it a buy. As well, they see a price target of $10.48, representing a 76.4% lift from where the price stands today.
On the date of publication, Josh Enomoto 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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.