DotBig review: What is more profitable to invest in 2023 — gas or oil
The performance of the oil and gas industry in 2022 was quite beneficial for investors, which rices interest in this market in 2023. The rapid increase in the prices for these assets is marked by three key events in the global arena:
- Russian invasions of Ukraine led to sanctions against the Russian oil and gas industry and cut down the supply of these resources from the country.
- OPEC+ took the decision to cut down oil production because of the uncertainty around the global market of energy resources.
- The US companies didn’t increase oil production volumes to cover the current demand and push the price down.
Considering such rapid changes in the market of energy resources, you might be wondering whether this uncertainty will remain powerful in 2023. We decided to study this matter to figure out if it’s a good idea to invest in oil or maybe it’s better to invest in natural gas.
Oil market outlook
As of the date of writing, the Brent Crude Oil quotes remain at the level of around $86.50. The main concerns regarding the oil market are sparked by sanctions imposed by the EU against Russia. The EU is going to ban Russian crude imports from December 5, which is why analysts expect the price to rise to around $100 by the end of this year. However, they also predict that this won’t last over 2023. The average price of Brent Crude Oil in 2023 is expected to be between $93–95.
Investing in Brent Crude Oil contracts isn’t the only way to benefit from the oil price fluctuations. Consider putting your funds into oil stocks. Here we have the best oil companies to invest in for 2023.
Over the past four quarters, ExxonMobil reported revenue of around $386 billion. This is one of the industry giants that deals not only with selling oil products to the market, but also with refining. Some experts suggest that this orientation of the company into multiple sectors of this huge industry is one of the reasons why it managed to remain stable during such periods of severe uncertainty in the global markets.
Nevertheless, the company cannot resist the impact of commodity price fluctuations completely. This is the reason why ExxonMobil had to cut its spending over the past year. This strategy seems to be effective, since the company has a long-term debt of $45 billion, much of which can be covered by $30 billion of the company’s cash.
As of the date of writing, the price of the XOM share on the New York Exchange is $111,34. Experts predict that in the following 5 years, investors will witness the growth of the company’s earnings per share. On average, estimations say that the stock will increase by around $25. That is why we suggest that the XOM stock is the best option to consider for those who aren’t sure of how to invest in oil market efficiently.
Enbridge is a Canadian company. It’s considered one of the most important players in the sector of energy resources transportation throughout North America. Considering this, you can guess that the income of the company comes from payments of producers of oil products and other energy commodities that transport their products through pipelines of Enbridge throughout Canada and the USA.
The source of Enbridge’s income is beneficial for its investors since it depends more on the amount of oil transported rather than on the market prices. That is the reason why the stability of this company hasn’t been shuttered even during the most severe periods in the global economy. In addition to this, investors can benefit from a starting dividend yield of 6.6% today.
As of today, the ENM stock price is around $55. The analysts don’t expect it to surge extremely over the following year. They predict that the earnings per share will grow only by 6% over the course of 5 years. Nevertheless, because of its generous dividends, we consider it one of the best investments in the oil market for 2023. Besides, Enbridge’s stability provides investors with a better possibility to preserve their funds.
Chevron Corporation is the second-largest oil company in the US market. It has been operating since 1879. Currently, the operations of the Chevron Corporation bring around $160 billion in revenue annually.
Chevron is the company that benefits from the increasing oil price. Probably, this is one of the reasons why Warren Buffett’s Berkshire Hathaway invested in almost 4 million CVS shares. Warren Buffett sees the prospects of this company and this is a good signal for investors to enter this competition.
As of the date of writing, the CVX stock is trading at $183.31, which means it performed a more than 50% growth since the beginning of this year. Considering this, we dare predict that the CVX stock price will be able to reach the maximum level of $215 over 2023.
Gas Market Outlook
According to the EU leaders, the Union is going to gas imports from Russia by ⅔ within the year. To correspond to this plan, Germany, for example, has filled in a full tank of gas storage. Despite that, experts expect the situation in the global gas market to be unstable.
Analysts say that the demand for gas will grow in winter because of the previous reduction of nuclear and hydro-power production. Because of this, algorithms predict that natural gas will have a bullish rally in 2023, meaning it can become a profitable one-year investment. Currently, the average gas price is around $3.495/MMBtu. It’s expected to grow up to $6.174/MMBtu over this winter. From the long-term perspective, gas prices can reach $10.742/MMBtu by the end of 2025.
It’s worth noting, that if you don’t know how to invest in natural gas, you can consider buying the above-mentioned stocks. These companies deal with gas production and transportation as well.
Both oil and gas investments are expected to bring financial gains in 2023. If you want to learn how to invest in oil and gas, subscribe to this blog and follow new DotBig publications.