3 Cheap Oil Stocks to Buy in September

It’s been a bad week for oil stocks. Even as OPEC+ countries postponed their production cuts scheduled to begin in October, global oil demand fell sharply. China in particular, which is the world’s largest importer, has not forecast any increases in demand. The result was a drop in oil prices.

OPEC+ is the 13-member OPEC countries, plus Russia and a handful of smaller, non-OPEC oil-producing countries.

Benchmark Brent crude fell below $73 a barrel, while the popular US West Texas Intermediate (WTI) fell below $70 a barrel. When you add the further deterioration of China’s economy plus the return of 700,000 barrels per day of Libyan oil, it creates conditions that have driven oil stocks lower. The S&P GSCI Crude Oil the index has fallen more than 7% in the past week.

However, this is an opportunity for investors to buy into the sector as long-term headwinds for the industry remain strong. The US Energy Information Administration continues to do so wait for the price of oil to rise towards the end of the year, although growth is lower than expected in July. Prices are expected to end 2024 at $81 a barrel versus the previous estimate of $88 a barrel. Production and prices are expected to continue to rise throughout 2025. Goldman Sachs (NYSE:GS) predicts peak oil demand it’s still decades away.

That makes any weakness in oil stock prices now an investment opportunity. The three companies below should be stocks to buy now.

Key points about this article:

• Oil stocks fell last week amid falling demand and rising production among OPEC+ countries, which helped lower oil prices.
• Long-term growth prospects for oil and natural gas remain high for the next decade and beyond, making the market’s dip in energy stocks a great buying opportunity.
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ExxonMobil (XOM)

The integrated oil and gas giant ExxonMobil (NYSE:XOM) is the first energy stock bought. While other producers have diversified into renewables, Exxon remains steadfast in its commitment to oil and gas. It’s a much less risky move because it sticks to Exxon’s core competency and provides a path to faster, higher growth and profits.

Exxon too quickly became an industry leader in the all-important Permian Basin with the acquisition, last year, of Pioneer Natural Resources. Adding Pioneer’s 850,000 net acres to its own 570,000 net acres allowed Exxon to outperform the competition and helped drive near-record profits last quarter.

The oil giant’s shares fell nearly 3% last week, making XOM’s 2024 performance essentially flat. It offers investors a cheap valuation at 13 times earnings, less than two times sales and 15 times free cash flow. While the PE and PS ratios are within its historical average, Exxon’s price to FCF is well below its norm.

Shell (SHEL)

New Shell (NYSE:SHEL) CEO Wael Sawan is focused on returning shareholder value. While that means the oil stock is buying back a lot of shares and by paying dividends — about $6.1 billion in the second quarter — it’s also cutting costs sharply. Shell maintains its commitment to cut $2 billion to $3 billion by the end of 2025. Of that, $1 billion will come from exiting businesses.

Like other oil companies, Shell has shifted from growth by any means to focusing exclusively on its most profitable projects.

The oil company is trying to close the valuation gap with its peers, so it’s also curbing its spending. Capital spending for the current year is forecast to be between $22 billion and $24 billion. Combined with its cost-cutting savings and increasing its distributions to shareholders, which are targeted at 30% to 40% of cash flow, Shell looks positioned for success.

SHEL shares fell more than 5% last week, making its valuation extremely low. The oil stock trades at just 8 times next year’s earnings, a fraction of its sales and a bargain 7 times free cash flow. With a dividend yield of 4% annually, the oil company is a very attractive stock to buy now.

Enterprise Products Partners (EPD)

Midstream leader Enterprise product partners (NYSE:EPD) is the third energy stock to add to your buy list. It is one of the largest operators in the field, with more than 50,000 miles of pipeline and storage capacity for more than 300 million barrels of liquids. The company as well just agreed to purchase private natural gas collection and treatment company Pinon Midstream for $950 million in cash.

It’s a significant acquisition because Pinon’s Delaware Basin sour gas treatment system pushes Enterprise Products’ plans to expand into the market by three to four years. There is a substantial lack of such services in the region, which has 7,500 wells, leading to restrictions on drilling activity. The Delaware Basin is located in the region of New Mexico and Texas.

Manufacturers noted the lack of acid gas treatment options. This acquisition gives the company a leading position in the market. Coupled with the midstream operator’s existing strong financials, this could be a major initiative to grow the stock.

This likely explains why EPD stock was barely affected by the oil industry news this week. Enterprise Products Partners operates long-term, paid contracts. That means whether his customers use his capacity or take the product, he gets paid. This produces a very stable income stream and makes EPD a buy-now stock.

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