After a very sharp rise since the summer, oil was hammered on Friday during the huge sell-off due to the Omicron variant. While the “black gold” roared back over the $70 level on Monday, reclaiming about half of the Friday losses, if one firm is right, this may be one of the last times for a while you see oil at this level. That doesn’t bode well for consumers already plagued by rising inflation.
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A new and somewhat provocative report from the analysts at JPMorgan is titled: “OPEC+ ‘Show me the Barrels’; $150/barrel on the horizon as capacity shocks.” The case is made in this report that not only is oil going higher, but it potentially could go much higher over the next two years:
We see long-term $80/barrel Brent (real) as the marginal cost to deliver a balanced market in 2024 and beyond. Incorporating our model of OPEC+ true capacity, we expect oil to overshoot to $125/barrel in 2022 and $150/barrel in 2023.
While the possibility that the extreme pain for consumers could be more on the front end, the reality is that it makes sense to buy the big dividend-paying energy giants now as a hedge against a massive rise in 2022 and 2023.
We screened our 24/7 Wall St. database looking for the best dividend-paying energy stocks rated Buy at major Wall Street firms and found four that are cheap and have some serious upside potential. We focused on companies that are rated Buy, but it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
BP
This is one of the premier European integrated oil giants, and Goldman Sachs is very positive on the shares. BP PLC (NYSE: BP) engages in the energy business worldwide. It produces and trades in natural gas; offers biofuels; operates onshore and offshore wind power and solar power generating facilities; and provides de-carbonization solutions and services, such as hydrogen and carbon capture, usage and storage.
The company is also involved in the convenience and mobility business, which manages the sale of fuels to wholesale and retail customers, convenience products, aviation fuels, and Castrol lubricants. It is involved in refining, supply and trading of oil products, as well as operation of electric vehicle charging facilities. In addition, it produces and refines oil and gas, and it invests in upstream, downstream and alternative energy companies, as well as in advanced mobility, bio and low carbon products, carbon management, digital transformation and power and storage areas.
BP stock comes with a 4.83% dividend yield. The Goldman Sachs price target for the domestic shares is $45, which compares with the $35.22 consensus target. The final trade Monday was reported at $26.18 a share.
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