National gasoline prices hit $4.57 on Wednesday, May 18, while in California and other states, prices are over $6.00. Elevated oil prices should not bear the sole blame for this; reduction in oil refining capacity, as well as reduced exports from Russia and China, all have a role to play.
It seems as if the oil demand is reaching pre-pandemic levels, which left oil refiners scrambling to fill the demand. However, some notable figures like the Saudi energy minister believe that a refinery capacity shortage cannot be solved by upstream producers.
Thus, with prices on the verge of breaching $6 at the pump, Finbold researched and identified two stocks that could benefit from the rising fuel prices.
Chevron Corporation (NYSE: CVX)
Chevron is an integrated producer, which could stand to benefit from upstream, midstream, and downstream segments of the business. The company missed Q1 earnings; however, the numbers seemed impressive, with earnings per share (EPS) standing at $3.36 while the revenue actually beat by 70% to $54.37 billion.
The dividend of 3.38% seems pretty safe with such earnings and increasing demand for the company’s products. Though not cheap, as the shares sit near 52-week highs, the strong balance sheet could entice investors to stay in the stock.
More recently, the shares have created a wider trading range between $155 and $175 but do not have the momentum to burst through the resistances on either side. Trading volumes have stayed consistent throughout May.
On Wall Street, analysts agree that the shares are a moderate buy, predicting for the next 12 months that the shares could trade at $172.46. If the shares reach this price, they would have to rise 2.62% from the current trading price of $168.06.
Valero Energy Corporation (NYSE: VLO)
Valero is an oil and gas refining and marketing company that thrives during the rising inflation, demand, and oil prices. For Q1, the company beat expectations for the top and bottom lines with EPS at $2.31, beating expectations by $0.66. Revenue, on the other hand, beat expectations by $6.31 billion, reaching a total of $38.54 billion.
The high dividend yield of 3.26% has been recently declared at $0.98 a quarter and should be safe for the near-term future. Shares were on a tear in 2022, rising over 60% year-to-date (YTD), losing some steam in the last session. Volume increases have been noted again while the share bounced above all daily Simple Moving Averages.
Elsewhere the company is seen as a strong buy, with average price predictions seen for the next 12 months to be $121.15. Currently, shares trade at $124.68, a bit above the average price predictions; however, they are still 13.8% away from the most bullish prediction of $142 a share.
This year energy and commodities have been unmatched in the markets, with oil rarely trading below $100 a barrel. Not only have these two companies skyrocketed from the pandemic lows, but due to geopolitical tensions, they have passed higher prices and demand onto consumers pocketing in solid gains.
Historically, energy stocks have performed well during times of high inflation and geopolitical tensions. Will this time be different? Only time will tell.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.