Contrarian investors reportedly are urged to consider one seemingly overlooked sector which appears “primed to outperform in 2019.”
U.S. News recently said that its picks for the 10 best energy stocks to buy for 2019 “are chock-full of value, heavy dividends and growth names.”
The report said that ironically, one of the bearish catalysts for oil prices has been booming production in the U.S., which is primed to become a net energy exporter by 2023. “But America’s blossoming is a great thing for many of the companies, and OPEC’s decision in December to cut production should also help revive the sector,” the report said.
A look at 3 of the report’s 10 picks:
Phillips 66 Partners LP (PSXP)
As a master limited partnership, “Phillips 66 Partners is a unique type of investment, similar to a real estate investment trust. By passing through all extra cash flows to investors, MLPs are allowed to avoid corporate taxes, giving the company a cost advantage over competitors and allowing it to pay large dividends,” the report said. Phillips pipelines – which it collects tolls from regardless of oil prices – make it one of the best energy stocks to buy for 2019, U.S. News explained.
Occidental Petroleum (OXY)
Named by U.S. News as one of the best dividend stocks to buy, Occidental’s 4.7 percent dividend and price-earnings ratio of 13 make this $51 billion energy powerhouse a relatively safe bet.
Exxon Mobil Corp. (XOM)
Exxon “is a must-own for conservative income investors who want to insulate themselves somewhat from the volatile ups and downs of global oil and natural gas markets.” Exxon’s 4.2 percent dividend should keep long-term investors around.
Meanwhile, oil prices dropped about 2 percent on Friday, weighed down by a falling U.S. stock market, while weak economic data from China pointed to lower fuel demand in the world’s biggest oil importer, Reuters reported.
“The oil complex remains vulnerable to heavy selling into the equities especially when combined with a strengthening in the U.S. dollar as is the case so far today,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
U.S. equity markets broadly fell as China’s November retail sales grew at their weakest pace since 2003 and industrial output rose the least in nearly three years. The report added to nerves about U.S.-China trade relations.
Chinese oil refinery throughput in November fell from October, suggesting an easing in oil demand, though runs were 2.9 percent above year-ago levels.
“The energy complex is on the back foot this morning as a batch of soft Chinese economic data triggers a flurry of pre-weekend profit-taking,” PVM Oil analyst Stephen Brennock said.
Concerned by mounting oversupply, the Organization of the Petroleum Exporting Countries and other oil producers including Russia agreed last week to reduce output by 1.2 million barrels per day (bpd), or more than 1 percent of global demand.
“For the time being until the OPEC cuts start kicking in, the market is oversupplied in the short term,” said Tony Nunan, oil risk manager at Mitsubishi Corp. “If China is slowing down, that’s definitely a concern.”
U.S. energy firms cut 4 oil rigs in the week to Dec. 14, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday. The data is seen as an indicator of future production.
World stocks tumble on weak economic data from China and Europe
The International Energy Agency said on Thursday it expected a deficit in oil supply by the second quarter of next year, provided OPEC members and other key producers stuck closely to last week’s deal to cut output.
As part of the agreement, de facto OPEC leader Saudi Arabia plans to reduce its output to 10.2 million bpd in January.
The IEA kept its 2019 forecast for global oil demand growth at 1.4 million bpd, unchanged from its projection last month, and said it expected growth of 1.3 million bpd this year.
Barclays said on Friday it expects oil prices to rebound in the first half of 2019 on falling inventories, Saudi Arabia’s export cuts and an end to the Iran sanction waivers.