This year has started on yet another note of geopolitical shocks as the United States attacked Venezuela, which has rich reserves of oil, silver, and gold. This sent gold and silver prices to record highs while pulling down crude oil prices. Behind the stark difference in their momentum was the nature of these commodities. While gold and silver carry a store of value and are used as a safe haven in times of turmoil, oil has been facing a supply glut. Too much supply of oil can drive down the price. Yet many Canadian oil stocks saw an uptick on the Venezuelan news.
Why are Canadian oil stocks rising?
Venezuela has been in a crisis for a long time. It produces an estimated 600,000–700,000 barrels per day, but faces US sanctions on oil exports. If the US plans to establish order in Venezuela, it will require billions of dollars of investment and four to five years to make a difference. That gives Canada an upper hand as it already has a rich energy infrastructure.
What happens if the US oil companies enter Venezuela?
There is something about Venezuela that makes oil stocks jittery. It has the largest proven oil reserves with an estimated 303.2 billion barrels (as of 2024), according to data from the Organization of the Petroleum Exporting Countries (OPEC). It is even bigger than Saudi Arabia’s proven reserves of 267.2 billion barrels. Yet Venezuela contributes just 1% of global supply because of more than a decade of sanctions, underinvestment, and infrastructure decline.
If US companies enter Venezuela, they could unlock those reserves and bring down oil prices. This could alter the oil supply chain once again. That could disrupt oil prices in the long term. How Venezuela’s politics shape up will determine the future of the black gold.
This Canadian energy stock is a steal
In the meantime, oil stocks will remain volatile. This has created an opportunity to buy Canadian natural gas stock, Tourmaline Oil (TSX:TOU). It is the largest natural gas producer in Canada and the fifth-largest in North America. While oil prices fluctuate, natural gas is the next big energy commodity seeing growing demand.
Natural gas-fired plants are powering artificial intelligence (AI) data centres, heating homes, and providing energy for cooking. The shift to greener alternatives has made natural gas a trusted and less-polluting energy source. The next 20 years could see natural gas producers becoming the next dividend kings.
Tourmaline will benefit from the natural gas demand boom. It has been growing dividends annually since it started paying dividends in 2018. In 2022, it started paying special dividends as North American natural gas exports picked up momentum after the Russia-Ukraine war. The base dividend growth makes up 85% of the free cash flow.
Tourmaline plans to grow its free cash flow by increasing production and reducing debt. This free cash flow will partially be used for dividend payments. Irrespective of the oil cycle, Tourmaline will continue growing dividends on natural gas exports.
Now is a good time to buy the stock. Although the dividend yield is 3.3%, the growth rate and special dividend make it a steal if you stay invested for the long term.
