The price of WTI crude oil has risen from less than $77 per barrel at the beginning of the year to $83.85 per barrel in April due to escalating geopolitical tensions in the Middle East. On the Toronto Stock Exchange, shares of Suncor Energy (TSX:SU) have surged 25% since February 14, surpassing their June 2022 highs, when oil prices spiked due to the Russia-Ukraine war.
Due to climbing oil prices, US inflation rose to 3.5% in March 2024, making hopes of a near-term interest rate cut by the Federal Reserve slim.
The World Bank recently released its forecast for the average price of Brent crude oil in 2024, saying that assuming no supply disruptions related to geopolitical conflicts, oil prices could average around $84 per barrel; if there are moderate conflict-related supply disruptions, oil prices could rise to near $92 per barrel; and if severe supply disruptive events occurred, oil prices could soar to $100 per barrel.
Meanwhile, Saudi Arabia, the world’s largest oil exporter, is hoping to fund its economic growth through higher oil prices. The International Monetary Fund (IMF) predicts that Saudi Arabia will need oil prices of $96.20 per barrel to balance its budget in 2024.
For investors interested in Energy Stocks, Suncor is now trading above C$53, which is the same level in June 2022 when Brunt oil prices peak at $125 a barrel. So can this energy stock go even higher next if oil prices continue to rise?
Suncor Energy is a cyclical stock. It doesn’t make much sense to buy it if the price is near record high level. However, if you are already holding this energy stock now, it’s better to hold it until the end of the year, as it can protect against inflation and energy and commodity price volatility. If you want to add a stock to the portfolio now, then Barrick Gold (TSX:ABX) might be a better choice. Gold prices tend to rise in times of crisis. If geopolitical tensions escalate and cause a supply shock, gold prices could continue to soar, driving gold miners’ stock prices higher.
Although the currencies we use today are not backed by gold, inflation has had a positive impact on the price of gold and it still has exchange value globally. Since February 14, Barrick Gold’s shares have soared 29%, making it a more attractive choice compared with Suncor Energy.
