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The Best Oil Stocks to Buy in 2017
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Stocks: MMP, PAA, XOM

The Best Oil Stocks to Buy in 2017

By Dustin Parrett, Associate Editor, Money Morning • February 1, 2017

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Today, we've found the best oil stocks to buy to help you profit from rising oil prices.

You see, Money Morning Global Energy Strategist Dr. Kent Moors says oil prices could climb 20% higher in 2017. And the oil stocks we've picked today are uniquely positioned to profit from these rising oil prices.

WTI crude oil prices have soared 14% to $52.97 a barrel since OPEC agreed cut oil production on Nov. 30. Because oil prices are rising, oil producers are making more money on their oil, so oil company stocks are positioned perfectly.

And now is the perfect time to invest in oil stocks as oil prices are poised for that 20% gain I mentioned.

To show you how higher oil prices help oil stocks, let's look at the NYSE Arca Oil & Gas Index (NYSE Arca: XOI). XOI tracks a sampling of major oil stocks. Check out how XOI moved with oil prices last year.

oil stocks to buy

As you can see, XOI has climbed alongside oil prices. The two oil stocks we're recommending today have doubled those gains.

Now, trying to make money on rising oil prices by trading oil futures can be risky. Oil futures can swing dramatically based on every bit of news, from the value of the dollar to renewed EIA estimates.

And oil ETFs are weighed down with bad stocks and management fees.

Instead, we're going to show you the best oil stocks to buy in 2017...

Our crude oil stock picks surged a combined 36% over the last year. Analysts project their earnings per share (EPS) will grow up to 91% in 2017.

These top oil stocks pay an average dividend yield of 5.7%, much more than Big Oil companies like Exxon Mobil Corp. (NYSE: XOM) and its 3.59% dividend yield.

And both oil companies are at the center of growing oil production in the United States...

But before we show you the best oil stocks to play as oil prices rise, here's why oil prices in 2017 have room to soar a whopping 20%...

Why the Price of Oil Will Soar 20% in 2017

As long as the OPEC agreement stays in place, the cartel will be able to manage an oil price floor above $50 a barrel. And Moors thinks oil prices will rise above that, too.

Don't Miss: Moors' Bold 2017 Oil Price Forecast

Oil prices hit a 10-year low in 2016, when the price of WTI crude oil fell to $35.59 a barrel in January. Oil prices had been above $90 a barrel as recently as 2014.

But the collapse of oil prices was partly by design.

Saudi Arabia took a risky gamble that it could drive American shale oil companies out of business by flooding the market with oil, sending the price of oil downward.

The EIA estimates shale oil amounts to 52% of American oil production. But producing shale oil is expensive. That means it was only profitable for American oil producers when oil prices were over $60 a barrel in 2014. And that's why the Saudis hoped to tank oil prices.

The Saudi gamble collapsed oil prices. But it didn't put an end to American shale oil businesses. Low oil prices simply meant American oil producers got more innovative. Shale oil is now profitable above $40 a barrel, according to data from Reuters.

Now countries that rely on oil exports to fund their budgets, like those in OPEC, are desperate for higher oil prices. And they have little to show for the Saudi gambit to claim market share from U.S. producers.

That's why OPEC was able to reach its first agreement to cut oil production since 2008. Moors says the cartel's need for higher oil prices is the reason the agreement will last, too.

So far, OPEC has adhered to the agreement since it officially began on Jan. 1.

Oil prices rose 2.4% yesterday (Jan. 31) on news OPEC members are still complying with the agreement.

The cartel has cut oil production by 1 million barrels a day since the agreement started. Most importantly, Saudi Arabia has led the cuts by slashing its output to below 10.1 million barrels a day.

"If Saudi Arabia is cutting even more than it promised, that shows its intent to make the deal work," says John Saucer, vice president of research and analysis at Mobius Risk Group, as reported in The Wall Street Journal yesterday (Jan. 31).

As long as OPEC keeps oil prices above $50 a barrel, American oil companies will continue to grow. And the best oil stocks will soar.

Trending: There Are Big Changes and Big Profits Coming to the Oil Sector in 2017

So now that you know oil prices are heading up in 2017, we're going to show you how to profit from it.

These oil companies are key cogs in American oil production, and as prices rise, these companies are going to be raking in even more money. Here are the best oil stocks to buy in 2017...

These Are the Best Oil Stocks to Buy in 2017

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Mike Larzelere
Mike Larzelere
6 years ago

I would like to know how this PTCO penny stock is doing? Are some of the big oil companies forcing its stocks to go down so it cannot compete in the bigger market? I keep reading how this stock is suppose to soar. What is keeping it down?

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Stocks: CNX, MMP, PAA, PSXP, XOM

The Best Oil Stocks to Buy in 2017

By Dustin Parrett, Associate Editor, Money Morning • January 6, 2017

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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.

oil stocks to buy in 2017

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.

Don't Miss: My (Bold) 2017 Oil Price Forecast - and Today's Most Profitable Energy Play

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...

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