Oil futures hit a 10-year low of $26.55 a barrel in January 2016. Current oil futures contracts are now up over 100% since then to $54.22. But oil prices are still climbing. Money Morning Global Energy Strategist Dr. Kent Moors says oil prices are climbing even higher in 2017.
That means there's plenty of opportunity for investors to profit from surging oil prices. And to help you make money on oil, we're giving you our best oil company stocks to buy this year.
Buying the top oil stocks is simply the best way to profit from higher oil prices. Traders can take their chances with futures contracts, but the market is often volatile and unpredictable. Passive investors might prefer oil ETFs, but many investors don't realize ETFs are loaded with fees and bloated with bad stocks.
We're going to show you the best oil stocks to buy in 2017, but before we get to that, here's why 2017 is going to be a great year for oil stocks...
The Environment for Oil Stocks Couldn't Be Better
There are three big reasons 2017 will lead to profits for the right oil stocks.
First, the OPEC agreement to reduce the oil supply is working.
On Nov. 30, OPEC announced a deal with 11 other countries to cut oil production for the first time in over eight years. The agreement cuts oil production by 1.8 million barrels per day.
Since the deal was announced, oil prices rose nearly 20%. And since the deal went into effect on Jan. 1, all countries are adhering to the arrangement.
Moors says as long as the OPEC deal stays in place, it will establish a price floor above $50 a barrel. Plus, it means oil prices could rise even higher if OPEC sticks to the cut.
Trending Now: Read Moors Bold 2017 Oil Price Prediction
Second, demand for oil is rising.
The EIA predicts that the demand for energy will increase by 25% through 2040 as India and China both grow in population and economic development. And oil will be the dominant source of meeting that demand. Exxon Mobil Corp.'s (NYSE: XOM) annual energy outlook predicts oil will remain the primary source of the world's energy through 2040.
Growing demand is important because it will help keep prices up. That's especially true when OPEC is cutting back oil production to reduce supply.
And because oil will continue to be the dominant source of energy, investors don't have to fear new forms of alternative energy taking its place.
Third, the Trump administration is creating a friendly environment for oil companies. And oil company stocks will reap the benefits.
President Trump campaigned on a platform to make "America energy independent" by reducing regulations and restrictions on oil and gas production.
And so far he is following through as president.
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In January, President Trump signed an executive order ending restrictions on the Keystone XL and Dakota Access pipelines. Shares of Energy Transfer Partners LP (NYSE: ETP), the owners of Dakota Access, are up 6.37% this year.
President Trump has also appointed top-level officials sympathetic to the oil industry.
Rex Tillerson, the former CEO of Exxon Mobil, is now the U.S. secretary of state. Former Oklahoma Attorney General Scott Pruitt is now the head of the Environmental Protection Agency (EPA). As attorney general, Pruitt has sued the EPA more than a dozen times on behalf of oil companies.
And President Trump has signed legislation from Congress meant to help American oil companies. On Feb. 14, President Trump signed a bill that eliminates a Dodd-Frank regulation requiring oil companies to disclose payments made to foreign governments.
Now that you've seen why 2017 will be a great year for crude oil stocks, we want to show you the best oil company stocks to buy to profit from this environment. Check out our top oil stocks of 2017...
The Top Oil Company Stocks to Buy Now
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Plains All American Pipeline LP (NYSE: PAA) is a midstream oil company specializing in oil transportation and storage. As an oil "toll keeper," PAA profits when oil prices rise. That's because oil producers drill more oil and need to transport it to market.
Plains All American owns and operates major pipelines throughout North America. PAA's pipelines run from North Dakota and Texas to the Gulf Coast. The company's largest assets are in the Permian Basin, a region rich in shale oil.
In 2017 the company is looking at a production boost of up to 20%, and analysts surveyed by Yahoo Finance forecast that PAA's earnings per share (EPS) could increase 52%.
On Feb. 13, Plains All American Pipeline announced a joint venture with Noble Midstream Partners for the acquisition of Advantage Pipeline LLC. Advantage owns a 70-mile crude oil pipeline located in the Delaware Basin, a major oil field in West Texas. The acquisition is for $133 million, subject to regulatory approvals.
But the acquisition is a sign PAA is preparing to handle a lot more volume now that oil prices are rising, and that means you can profit, too.
PAA stock is trading at $31.88 and is up 50.31% since a year ago. The company also has a generous 6.9% dividend yield, which adds extra income for investors.
Our other stock play is Magellan Midstream Partners LP (NYSE: MMP).
Magellan is another midstream oil company that stores, transports, and distributes crude oil and refined petroleum products. Like Plains All American, Magellan is well-positioned to take advantage of higher crude oil prices. And unlike oil-drilling companies, a midstream company like Magellan is much a less risky play. Oil drillers have to invest a lot of money into researching profitable wells to drill and can sink money into unprofitable projects.
But Magellan Midstream Partners owns and operates more than 10,000 miles of pipelines throughout the country and has just begun a new project to expand its storage capacity by an additional 1.7 million barrels. MMP also plans to expand its pipeline reach from the Gulf Coast into several key Texas markets.
For Q4 2016, the company was able to increase its crude oil segment operating margins by 17.9%. The total volume the company shipped in Q4 increased 5.9%, and its revenue per shipped barrel went up by 2.2%. That's a great sign for things to come as oil prices continue to rise in 2017.
MMP is trading at $77.74, and shares are up 17.1% over the last year. In January, MMP increased its quarterly cash distribution to $0.855. The company has a 4.4% dividend yield and a healthy 36.69% operating margin.
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