3 Energy Stocks Investors Should Invest in Before 2025 is Over

EIA projects West Texas Intermediate will average $65.32/bbl this year (down from $76.60 last year) and decline to $51.42/bbl in 2026, a backdrop the article argues will favor refiners and oilfield services. Phillips 66 reported 99% crude utilization in the September quarter and is positioned to benefit from discounted Canadian heavy crude (Zacks Rank #1); Valero operates 15 refineries with 3.2 million bpd capacity and is expected to capture margins from lower feedstock costs (Zacks Rank #2); Oceaneering (Zacks Rank #1) should see demand tailwinds in oilfield services and ADTech strength in 2H 2026. The piece highlights these fundamentals and analyst rankings as reasons investors should consider PSX, VLO and OII heading into 2026.

Analysis

Market structure: A lower WTI path to $51.4 in 2026 (EIA) favours refiners and select oilfield services versus upstream producers; refiners like PSX (99% utilization last quarter) and VLO (3.2m bpd capacity) capture wider light-heavy differentials and crack spreads if product demand stays stable. Expect market share gains for refiners that can process heavy Canadian crude (PSX) and for nimble service providers (OII) that win offshore engineering/robotics work while upstream capex rebalances. Lower crude also compresses exploration economics for high-cost producers but can increase drilling activity where breakevens < $40, altering regional rig counts and service demand patterns.

Risk assessment: Key tail risks include a supply shock/OPEC surprise that lifts WTI > $80 for 30+ days (compressing some refinery margins and lifting upstream), rapid EV adoption that erodes gasoline demand >2% CAGR vs expectations, and regulatory carbon rules that raise refinery capex >10% over 2 years. Time horizons: immediate (days) — volatility around inventory reports; short (weeks–months) — refinery turnarounds and Q1’26 crack spreads; long (quarters–years) — structural feedstock availability and ADTech commercialization for OII. Hidden dependencies include heavy crude pipeline capacity (Enbridge/TC pipeline outages) and Canadian oil sands politics.

Trade implications: Direct: establish tactical longs in PSX and VLO (see allocations below) and a smaller cyclically exposed long in OII to play offshore services/ADTech pickup in H2 2026. Options: buy 9–12 month call spreads on PSX and VLO (10–15% OTM) to limit premium; for OII consider buying 12-month 1:1 call ratio or buying cheap long-dated calls if implied volatility is low. Pair trades: long VLO or PSX vs short a diversified E&P ETF (XOP) to express refining outperformance while hedging crude-price risk.

Contrarian angles: Consensus underestimates feedstock logistics risk — persistent low WTI could tighten heavy crude supply (Canadian capacity constraints) and flip margins; also OII’s ADTech diversification is underpriced if defense/aerospace revenue grows >20% YoY in 2026. Reaction may be underdone for refiners trading at modest multiples; however, the trade is asymmetric — set stop-losses for WTI > $75 (30-day avg) or two quarters of refinery utilization <92%. Historical parallels: 2015–2016 saw refiners outperform early in troughs but later suffer when product demand weakened; watch product demand metrics (gasoline demand, jet fuel) monthly.

Key Decisions for Investors

• Establish a 2–3% portfolio long in Phillips 66 (PSX) over Dec–Jan, targeting a blended cost by buying into weakness; hedge 30% of position with a 9–12 month PSX 10–15% OTM call spread to cap downside if WTI spikes above $75 for a 30-day average.
• Add a 2% tactical long in Valero (VLO) via 12-month 10% OTM call spreads or buy-and-hold equity, expecting refinery margin tailwind in H1–H2 2026; trim or exit if national refinery utilization falls below 92% for two consecutive months or VLO guidance cuts EBITDA >15% for FY2026.
• Initiate a 1–1.5% speculative position in Oceaneering (OII) using long 12-month calls (or buy equity) ahead of expected ADTech pickup in Q2–Q3 2026; increase to 3% if ADTech revenue shows >20% YoY growth in Q2 guidance, reduce if offshore capex guidance falls >15%.
• Implement a relative-value pair: long 2% VLO (or PSX) vs short 2% XOP ETF to express refining outperformance vs E&P; unwind if WTI stays < $45 for 60 days (indicating upstream capitulation) or if crack spreads compress >20% quarter-over-quarter.
• Monitor three triggers closely: monthly U.S. gasoline/jet demand (sell signal if down >5% YoY for two months), WTI 30-day avg crossing $75 (reduce refiner exposure), and Canadian heavy crude takeaway capacity/utilization (if pipeline outages >7 days, reduce PSX exposure).