Wall Street banks see oil prices shooting 'well above' $80 this year — here are their top stock picks

Published Wed, Jun 30 20217:30 PM EDTUpdated Thu, Jul 1 20211:10 AM EDT

Sam Meredith @in/samuelmeredith @smeredith19

Analysts on Wall Street believe oil prices are on track to climb significantly beyond $80 a barrel in the coming months, potentially even surpassing triple digits as soon as next summer. These are their top stock picks amid an expected rally in crude markets. Oil prices have already climbed more than 40% since the start of the year, supported by an easing of Covid-related restrictions, an uptick in goods transportation and increased air travel. But U.S. investment banks still see plenty of room to run. Brent crude futures traded at $74.71 a barrel on Thursday, up around 0.1%, while U.S. West Texas Intermediate crude futures stood at $73.57, roughly 0.15% higher. Goldman Sachs sees international benchmark Brent crude averaging above $80 in the third quarter, with potential spikes "well above" that level as demand comes roaring back. JPMorgan expects crude oil prices to "decisively" break into the $80s during the final three months of the year, while Morgan Stanley believes Brent will trade between $75 to $80 through to the middle of 2022. Analysts at Bank of America , however, are even more bullish. They argue Brent prices could see $100 in the summer of next year. That would mark a return to triple digits for the first time since 2014. "The simple thesis is that post COVID, demand is poised to bounce back whereas for a variety of reasons supply may not fully keep up, putting OPEC+ back in control of the oil market," analysts at Bank of America said in a research note published June 21. These are the stocks analysts on Wall Street expect to outperform as a result of this trend. ExxonMobil : Analysts at Bank of America believe U.S. oil giant ExxonMobil is poised for a relative recovery after years of lagging performance. It lists the oil major among its "top ideas," reaffirming a buy rating for the stock. Goldman Sachs, meanwhile, says underappreciated value in key upstream assets with an improving outlook in downstream in the coming quarters "should drive consensus earnings revisions." In the oil industry, upstream refers to the discovery and pumping of oil and downstream involves the processing of oil and gas, selling and distribution. ConocoPhillips : Goldman Sachs says ConocoPhillips boasts the most upside among U.S. oil majors, estimating a 15% total return on the back of rising oil prices. Bank of America has a buy rating for the stock. Occidental Petroleum : Goldman Sachs says it sees potential for shares of Occidental Petroleum to outperform following a sharp multi-year underperformance. The U.S. bank cites balance sheet improvement, chemicals earnings revisions and long-term growth for low-carbon projects. Bank of America analysts also list the company among its top ideas. Hess Corp : Analysts at Bank of America and Goldman Sachs both have a buy rating for Hess Corp. The latter believes the company is "uniquely positioned" to benefit from long-term oil growth from Guyana, which it says is "favorably positioned" on the cost curve. Diamondback Energy : The Permian basin-focused shale producer is singled out by analysts at Goldman Sachs, with recent acquisitions expected to drive favorable production and capital expenditure. Devon Energy : Goldman Sachs says the U.S. oil and gas producer is well positioned to benefit from bullish oil price forecasts in the coming months, while also making transformational changes on corporate supply/cost returns. Marathon : Analysts at Credit Suisse have a target share price of $74 for the exploration and production company, up from around $60 at present. The Swiss bank has an outperform rating for the stock. Chevron : Credit Suisse has set a target share price of $126 for Chevron, compared to roughly $104 as of Wednesday. The bank lists the U.S. oil major as outperform, noting short-term risks to this rating include geopolitical risks and natural disasters, such as hurricanes. Phillips 66 : Credit Suisse says an outperform rating for Phillips 66 is underpinned by a target share price of $95. To date, the U.S. refiner trades at around $85 per share.

A man fills his car with petrol at a Esso petrol and refueling station in London, U.K., on Thursday, June 17, 2021.

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