Energy stocks have long been a favourite investment for many Canadian investors due to the industry’s resilience in the sector. One of my top picks is Canadian Natural Resources (TSX:CNQ), which is up by almost 33% from its 52-week low right now.
If you’ve been wondering where you can invest in the stock market right now, CNQ stock might be a good investment to consider, and here’s why.
Canadian Natural Resources stock
Canadian Natural Resources is a $97.19 billion market capitalization company headquartered in Calgary. It is one of Canada’s largest oil and natural gas producers, with lucrative operations in Offshore Africa and the North Sea. As of this writing, CNQ stock trades for $46.43 per share, up by almost 300% in the last five years.
Like other oil and natural gas producers, CNQ stock felt the effects of lower oil prices, but more recently, it attributed the share price declines it faced. The tariff-induced sell-off saw its shares dip to around $35 per share, alongside Western Texas Intermediate (WTI) crude oil prices going as low as US$57 per barrel.
That brings us to reason #1
As of this writing, WTI crude stands at US$72.80 per barrel. Still lower than the US$80 mark from last year, the recovery in oil prices has improved the situation for CNQ stock and its peers in the energy sector. The recent improvement in oil prices means better margins for CNQ stock, translating to a spike in share prices.
Here’s reason #2
Geopolitics has far-reaching consequences, and investors in the energy sector definitely feel it. Rising tensions between Iran and Israel, the trade war between the U.S. and China, and the tariff-fueled trade issues between the U.S. and Canada have all had a say in the situation.
The latest oil price hike is due to the Iran-Israel conflict, which might lead to Iran closing off the Strait of Hormuz. This is a region through which up to 30% of the global oil supply must travel to reach international customers. An escalation of conflicts in the region could send oil prices soaring past US$80 per barrel, and increase demand for Canadian oil, which might be more readily available.
And now, for reason #3
The performance of Canadian Natural Resources on the stock market might have suffered due to factors out of its control, but it is doing well as a business. The first quarter of fiscal 2025 saw it report record oil and natural gas production, boosted by production from new assets from its acquisition of Canadian assets held by Chevron late in 2024.
Its improving financial performance can also be attributed in part to its efficient operations. The breakeven point for CNQ stock is a US$45 price per barrel. With WTI climbing, its margins are increasing considerably.
Foolish takeaway
I have no doubt there will be more market volatility in the near term due to various geopolitical factors. However, CNQ stock is well-capitalized enough to weather the storm and adjust to any changing market conditions, especially those that favour demand for Canadian-produced oil. I think it might be worth adding to your self-directed investment portfolio if you can withstand short-term volatility.
