Oil prices are seeing an increase due to growing geopolitical risks, prompting investors to reevaluate the value of oil stocks in the market. One particular stock, which has seen a recent uptick in price, is trading near $53 compared to $49 just days ago, showing a 24% increase for the year.
Despite facing challenges in recent years, including operational issues and safety concerns, a new CEO appointed in 2023 has been successful in cutting costs and improving efficiency within the company. The rise in West Texas Intermediate oil prices to around US$90 last year also contributed to the recovery of the stock, which saw a rally from below $40 to a 12-month high of around $57.
However, with geopolitical tensions escalating, such as the potential blockage of the Straits of Hormuz by Iran and threats of conflict involving Israel and Iran, there is a possibility of oil prices spiking further. This could benefit companies like Suncor, especially with the recent opening of the Trans Mountain pipeline in Western Canada, providing access to global markets.
On the other hand, risks such as a slowing global economy, weak oil demand from China, and ample oil supplies could lead to fluctuations in oil prices. If tensions ease between Iran and Israel, prices may fall back below US$70 as focus shifts back to supply and demand dynamics.
In terms of dividends, Suncor made headlines in 2020 by cutting dividends at the start of the pandemic but has since increased them above previous levels. With a 5% dividend bump for 2024, the current distribution offers a 4% yield at the current share price.
Considering the progress of the company’s turnaround plan and the potential for higher oil prices in the future, Suncor may be an attractive investment opportunity for those confident in the stability of oil prices. However, investors concerned about global economic trends and oversupply in the market may opt for alternative investment opportunities.
