Canadian Natural Resources (TSX:CNQ) is down 12% in 2025, extending a year-long decline. Contrarian investors seeking high-yield dividends are wondering if CNQ stock is now oversold and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio.
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Canadian Natural Resources stock price
CNRL trades near $39 per share at the time of writing compared to the recent 12-month low of around $35. A year ago, CNQ was above $50 when oil prices were much higher.
West Texas Intermediate (WTI) oil trades for close to $57.00 per barrel right now compared to more than US$80 in the middle of January, when it saw a nice spike after an extended decline through the second half of last year. The recovery didn’t last long, however, and oil is now at its lowest point in more than four years.
The story in the past few months is all about the tariffs implemented by the United States. Energy traders are concerned that the United States and China will slide into a deep recession. This would reduce demand in the world’s two largest oil markets. China’s economic weakness was already partly responsible for the drop in oil prices last year.
Supply is also having an impact on the market. OPEC recently said it intends to increase output despite the weak market conditions. Non-OPEC producers, including Canada and the United States, hit record production levels in 2024 and continue to ramp up output.
Outlook for oil markets
Analysts widely expect oil markets to be oversupplied through the rest of 2025 and into next year. The extent of the decline of oil prices and the duration of the pullback will depend on the outcome of trade negotiations between the United States and the rest of the world. A global recession that lasts through 2026 could push oil prices much lower. On the positive side, any quick resolution on trade talks between the United States and China would likely send oil prices higher on hopes that an economic downturn will be short and mild.
CNRL earnings
CNRL says its WTI breakeven price is in the US$40 to US$45 range. This means the company is still generating decent margins at the current price. Higher production will help offset lower margins. CNRL will get the full benefit in 2025 from its US$6.5 billion takeover of Chevron’s Canadian assets late last year.
CNRL is also a major natural gas producer with extensive resources in western Canada. Natural gas prices are rebounding from a dip that occurred in April and are extending the upward trend that began last spring. Improved revenue from natural gas sales will also help offset the weakness in the oil market.
CNRL raised its dividend twice in 2024 and already hiked the payout again in 2025, so management doesn’t appear to be overly concerned about the long-term outlook. CNRL is known for its steady dividend growth through the commodity cycles. The company has raised the dividend in each of the past 25 years.
Time to buy?
Near-term volatility is expected, but income investors might want to start nibbling and then look to add on any further weakness. At some point, the energy sector will rebound, and you get paid a solid 6% yield right now to ride out the turbulence.
