Start the conversation
Oil prices have surged 51% since hitting a low in January 2016, and to help investors profit from that rise, we've made a list of the best oil stocks to buy in 2017.
Since hitting its 10-year low of $35.73 a barrel in January, WTI crude oil prices have soared 51% to $54.12 a barrel.
And Money Morning Global Energy Strategist Dr. Kent Moors says oil prices can go even higher in 2017. That's why we're bringing you the top oil stocks that will benefit from rising oil prices.
Our top oil stocks to buy in 2017 include two oil stocks gaining 11% and 37% over the last year. And we've added a bonus energy stock with gains of 118% since last year.
Before we get to our specific picks, here's why 2017 is shaping up to be a profitable year for oil stocks...
Why Oil Stocks in 2017 Are Going Up
There are three key reasons to be optimistic about oil stocks in 2017.
First, OPEC's agreement to cut production will lead to higher oil prices.
On Nov. 30, OPEC and 11 other countries agreed to cut oil production in an effort to boost oil prices. OPEC plans to cut oil production by 32.5 million barrels a day in 2017. That's why crude oil prices have risen 18% since the Nov. 30 announcement.
Check out how oil prices have jumped since the OPEC agreement in the chart below.
By limiting the supply of oil, prices will rise as long as demand stays the same. Moors says oil prices will remain above $50 a barrel as long as the OPEC deal holds together.
And the OPEC production cut officially started this week. As long as OPEC lives up to its agreement, 2017 will see consistently higher oil prices than 2016.
The second reason to be bullish on oil stocks in 2017 is the fact that energy is always in demand.
The EIA projects the demand for energy will increase 25% by 2040. They base their projection on growing population and more demand from China and India.
Oil will be a huge part of filling this need for energy.
In Exxon Mobil Corp.'s (NYSE: XOM) 2017 "Energy Outlook" report, the company predicts "oil will remain the world's primary source" of energy as demand rises through 2040.
That's why we've picked the best oil stocks positioned to capitalize on energy's continued demand.
Third, President-elect Donald Trump's proposed energy policies are favorable to crude oil stocks.
Trump ran on a platform of making America "energy independent." To do this, his plans call for reducing restrictions on American oil drilling and exploration. While Trump hasn't been sworn in yet, his cabinet nominees affirm his commitment to energy independence.
Trump nominated Oklahoma Attorney-General Scott Pruitt to run the EPA. Pruitt came to national prominence as an attorney-general by suing the EPA over environmental regulations against oil and gas companies in his state.
And Trump's highest-level nominee is former Exxon CEO Rex Tillerson. The former CEO is set to run the U.S. Department of State.
With the climate looking brighter for oil, these are our best oil stocks to buy in 2017...
Oil Stocks to Buy in 2017, No. 1: Magellan Midstream Partners
Magellan Midstream Partners (NYSE: MMP) is a $17.56 billion company that transports and distributes petroleum. MMP is shaping up to be one of the best 2017 oil stocks.
As higher oil prices make drilling oil more profitable, there will be renewed demand for oil transportation.
And Magellan is already preparing for this. The company is currently expanding its oil storage capacity by 1.7 million barrels.
MMP isn't just a good oil stock, it's a strong company to own all around.
Magellan has an operating margin of 39.69%. That means it takes in an average profit of 39.69% on each dollar of sales. The average operating margin of the entire S&P 500 is currently 21.07%.
MMP also pays an annual dividend yield of 4.12%. That's significant added income for investors owning MMP.
Also, a survey of 19 analysts by Yahoo Finance estimates that next year's EPS will beat 2016's EPS by 8%.
MMP stock currently trades at $76.96 a share and it's up 17% since Trump won the presidency on Nov. 8.
Oil Stocks to Buy in 2017, No. 2: Plains All American Pipeline, L.P.
Plains All American Pipeline (NYSE: PAA) controls 4 million barrels of crude oil and natural gas a day.
And with higher oil prices and fewer restrictions leading to more drilling, PAA's pipelines will be in demand in 2017.
In 2016, PAA partnered with Phillips 66 Partners LP (NYSE: PSXP) to build a $15 million pipeline expansion between Oklahoma and Canada. The new pipeline adds capacity for 100,000 more barrels of oil a day.
Investors have been rewarded by owning PAA stock already. The stock pays an annual dividend yield of 6.8%. The average dividend yield for all stocks on the S&P 500 is a mere 1.96%.
Analysts are also expecting PAA to have a strong 2017. The average 2017 EPS estimate of 19 analysts surveyed by Yahoo Finance show EPS climbing 52% year over year.
PAA stock trades at $32.96 and has gained 22% over the last six months, jumping 13% since the Nov. 8 election alone.
The oil sector isn't the only place we're targeting for profits in 2017. Natural gas prices are rising too. That's why our bonus energy pick is primed for growth.
And it's exploded with 118% gains in the last year...