We recently published a list of 10 Oil Stocks with Biggest Upside Potential According to Analysts. In this article, we are going to take a look at where Enbridge Inc. (NYSE:ENB) stands against the other oil stocks with biggest upside potential.
In an interview with CNBC on November 26, Daan Struyven, Co-Head of Global Commodities Research at Goldman Sachs, discussed the current state of the oil market and the potential impact of a ceasefire in the Middle East on oil prices.
Struyven noted that while the geopolitical risk premium in oil prices was fairly modest, he thinks that the market is focused on risks with a clear path to lower production. The market has not yet fully priced into this possibility, and the current price of oil is too low compared to inventory fundamentals.
Struyven pointed out that global oil inventories have edged down this year, and the market has been in a deficit of around 0.5% of global markets. He thinks that many oil investors are pricing in a large surplus for 2025, which Struyven believes is not done yet and he sees significant upside risk to prices in the short term, potentially coming from lower production from Iran.
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Struyven noted that while the Trump administration’s goals are achievable, they are largely driven by technological advancements and LNG export plans that are already underway despite any policy change. He also agreed that the big oil companies are not eager to spend more money on production on current oil prices.
Struyven also highlighted OPEC’s influence on the market, emphasizing Saudi Arabia’s preference for higher oil prices. He suggested that OPEC would likely defend a price floor of around $70 per barrel but would not hesitate to increase supply if prices climb above $80. This aligns with his expectation that oil prices will remain within a range of $70 to $85 per barrel.
Finally, Struyven attributed the changes in the oil market to the success of US shale production, which has accounted for 100% of global oil production growth over the past decade. This has put downward pressure on long-term prices, making it less likely for oil prices to spike above $100 as they did in the past.
The oil market is influenced by a range of factors, including geopolitical risks, production levels, and OPEC’s strategies. The potential for a ceasefire in the Middle East, for example, could impact prices, but the geopolitical risk premium is still relatively modest. Despite this, oil prices remain lower than expected based on inventory fundamentals. While these dynamics shape the near-term outlook, long-term oil price increases above $100 are less likely due to the impact of US shale production, which has accounted for all global oil production growth over the past decade.
Pipeline in industrial district
Our Methodology
For this article, we sifted through Energy ETFs and online rankings to form an initial list of 35 Oil stocks. We then sourced the analysts’ average price targets and picked the 10 stocks that had the highest upside potential, as of November 29. We also included their hedge fund sentiment, which was taken from Insider Monkey’s Hedge Fund database of 900 elite hedge funds as of Q3 of 2024. The list is sorted in ascending order of analysts’ average upside potential.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Enbridge Inc. (NYSE:ENB)
Upside Potential: 42.85%
Number of Hedge Fund Holders: 26
Enbridge Inc. (NYSE:ENB) is a leading energy infrastructure company that operates in the liquids pipelines, gas transmission, gas distribution and storage, and renewable power sectors. The company’s business model is centered around providing critical energy infrastructure services to its clients, including major oil and gas producers, refineries, and power generators. Enbridge Inc.’s (NYSE:ENB) extensive network of pipelines, storage facilities, and renewable energy assets enables it to transport and deliver energy products to markets across North America.
One of the key drivers of Enbridge Inc.’s (NYSE:ENB) growth is its liquid pipelines business. The company has recently acquired two additional docks and land adjacent to its Enbridge Ingleside Energy Center (EIEC) facility, which is one of the largest crude oil storage and export terminals in the US and will enable optimization of its existing docks and increase Very Large Crude Carrier windows.
Enbridge Inc.’s (NYSE:ENB) gas transmission business is also a significant contributor to its growth, with the company recently acquiring a 15% interest in the Delaware Basin Residue (DBR) natural gas system, which serves as a key conduit for the Whistler Pipeline.
Enbridge Inc. (NYSE:ENB) is also making significant investments in renewable energy, with the recent sanctioning of the Sequoia Solar project, a two-phase 815MW solar farm in Texas. The project is substantially contracted under long-term fixed-price power purchase agreements with strong investment-grade counterparties, including AT&T and Toyota.
Overall, ENB ranks 3rd on our list of oil stocks with biggest upside potential according to analysts. While we acknowledge the potential of ENB to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ENB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.