Can you buy oil stocks? Opportunities and challenges in energy investment for 2026

In the ever-evolving global energy landscape, can you buy oil stocks? This question troubles many investors. This article will analyze current investment opportunities in the energy market, through detailed fundamental research and trend analysis, to help you make informed investment decisions.

Why Oil Stocks Are Worth Paying Attention To

As a vital energy source for the global economy, oil price fluctuations directly impact national economic performance. The performance of the energy market over the past few years shows that the answer to “Can you buy oil stocks?” is not simply yes or no, but depends on multiple factors.

In 2022, the energy sector became the biggest winner in the U.S. stock market, with gains approaching 65%, while the S&P 500 index fell 19%. What is the logic behind this countertrend rise? Mainly driven by a strong post-pandemic economic recovery, coupled with intensified geopolitical conflicts that increased global energy tensions. Although oil prices later adjusted, long-term demand for energy has not weakened.

Three Major Investment Advantages in the Current Energy Market

Opportunities Brought by the Economic Cycle

The energy sector is highly correlated with the economic cycle. The global economy is gradually recovering from past difficulties, with China reopening fueling tourism and trade revival, which will inevitably increase demand for oil and natural gas. Historical data shows that whenever the economy enters recovery, energy stocks tend to lead market rallies.

Structural Tightness on the Supply Side

Although major energy companies are increasing investments, developing new capacity takes years. Short-term capacity shortages are difficult to resolve, creating profit expansion opportunities for refining companies and producers. Meanwhile, geopolitical conflicts continue to escalate, further supporting energy prices.

Stable Returns from High Dividends

Due to their profitability, energy companies often return more cash to shareholders. Data shows that the dividend growth rate in the energy sector has outpaced other industries, with recent growth reaching 50%. Many leading companies have consistently increased dividends for years and implemented large-scale share buyback programs, providing investors with dual returns.

Five Oil Stocks Worth Researching

ExxonMobil (XOM.US)

As one of the world’s largest energy companies by revenue, ExxonMobil has a presence across exploration, production, manufacturing, trading, transportation, and sales. Management has announced that by 2027, operating cash flow and earnings will double compared to 2019, reflecting confidence in future growth. Meanwhile, the company has increased its share repurchase target from $30 billion to $50 billion. With a current market cap of $420 billion, this could deliver substantial shareholder returns within three years.

Chevron (CVX.US)

As the second-largest U.S. and third-largest global energy company, Chevron operates over 7,000 gas stations and has a diversified business portfolio. The company has increased its annual dividend for 36 consecutive years and recently announced an increase in its annual share buyback program to $17.5 billion. These measures demonstrate a positive outlook on the company’s future.

Enbridge (ENB.US)

Enbridge operates North America’s largest oil pipeline system, transporting about 30% of North American oil. Since its main business involves fixed-rate pipeline transportation fees, its revenue is unrelated to crude oil prices, enabling highly stable cash flow. In volatile markets, this business model offers reliable defensive characteristics.

ConocoPhillips (COP.US)

ConocoPhillips is the world’s largest independent oil exploration and production company, with a clear cost advantage—crude oil supply costs are less than $30 per barrel. This means the company can remain profitable regardless of oil prices. Recently, the Biden administration approved a $7 billion major project in Alaska, further strengthening the company’s long-term growth prospects.

Cheniere Energy (LNG.US)

As the top liquefied natural gas (LNG) transportation and storage company in the U.S. and second globally, Cheniere is in a historic growth phase. Europe’s natural gas shortage has driven a surge in exports to Europe, with LNG liquefaction volume increasing over 200% year-over-year in Q3 2022. Short-term European energy demand remains strong, providing a sustainable growth engine for the company.

Risks to Understand Before Buying Oil Stocks

Threat of Economic Recession

Global central banks are still fighting inflation, with risks of slowing economic growth or recession by 2026. An economic downturn would directly reduce energy demand, pressuring oil stock performance.

Long-term Pressure from Energy Transition

Countries worldwide are accelerating the shift to clean energy. Rising electric vehicle adoption and the maturation of solar and hydrogen technologies threaten long-term demand for traditional oil. Investors should recognize that the oil industry faces structural decline risks.

Regulatory Policy Uncertainty

Governments are tightening regulations on fossil fuels and increasing subsidies for clean energy. Oil companies may seek to transform into new energy sectors or face shrinking market space.

Market Volatility Challenges

Energy stocks are historically volatile, with prices susceptible to supply shocks, geopolitical events, or macroeconomic expectations, which can cause significant short-term fluctuations. This poses challenges for risk-averse investors.

The Best Timing to Invest in Oil Stocks

Valuation Perspective

Currently, mainstream energy companies have P/E ratios generally between 6-8, still within reasonable historical ranges. However, this valuation reflects cautious market expectations for future growth. Investors should assess whether current prices adequately reflect risks.

Fundamental Perspective

Energy companies maintain strong profitability and cash flows. For income-focused investors, the high dividends are attractive, but the sustainability of these dividends should be evaluated.

Portfolio Allocation Perspective

Whether “Can you buy oil stocks?” depends ultimately on your portfolio needs. If your portfolio lacks energy exposure, allocating a certain proportion can help diversify risk. For those already heavily invested in oil stocks, caution is advised when adding more.

Final Investment Advice

Based on the current situation, the answer to “Can you buy oil stocks?” is: yes, but with caution.

The logical approach is to prioritize companies like ConocoPhillips and Enbridge, which have cost advantages and stable cash flows, followed by ExxonMobil and Chevron, which are capital-rich and have strong dividend-paying capacity. For investors willing to accept higher volatility, specialized companies benefiting from structural demand, such as Cheniere, are also worth attention.

However, when investing in oil stocks, control your position size—recommend no more than 15% of your portfolio—and stay attentive to energy transition developments, regularly reassessing whether your investment thesis remains valid. The future of the energy industry is uncertain, but there are still opportunities worth capturing in the short to medium term.