Global oil demand growth is slowing. The International Energy Agency has projected that global oil demand growth will decelerate as electric vehicle adoption rises, fuel efficiency improves, China’s economy slows, and elevated oil prices tied to the Iran conflict trigger demand destruction across parts of the global economy.
Yet despite those concerns, oil prices have remained above $90 per barrel amid geopolitical instability, underinvestment in supply, and persistent refinery constraints. That creates an unusual opportunity for oil stock investors.
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Two stocks to play the paradox
Oil companies are generating enormous cash flow, but some investors remain skeptical about the sector’s long-term future. The result is that several large energy companies still trade at surprisingly modest valuations despite strong shareholder returns. That is particularly true for integrated oil majors such as Chevron (NYSE: CVX) and TotalEnergies (NYSE: TTE).
Chevron continues to generate massive free cash flow at elevated oil prices while maintaining one of the industry’s strongest balance sheets. The company also expanded its long-term production profile through its Hess acquisition, giving Chevron additional exposure to Guyana, which is one of the world’s fastest-growing low-cost oil developments.
To be sure, Chevron is not solely dependent on rising oil prices. The company has spent years lowering production costs, expanding LNG exposure, and improving capital efficiency, which, combined, can help Chevron remain profitable during periods of weaker oil prices.
TotalEnergies may be even more diversified. Unlike a lot of traditional oil majors, TotalEnergies has aggressively expanded into liquefied natural gas, solar, wind, and electricity infrastructure while still maintaining substantial upstream oil exposure.
The company now operates one of the world’s largest LNG portfolios, which could become increasingly important as Europe continues to shift away from its reliance on Russian natural gas.
Valuations remain relatively low, too. TotalEnergies still trades at roughly 8.4x to 8.9x forward earnings while offering a dividend yield near 4.5%. Chevron also continues to return substantial capital to shareholders through dividends and buybacks, while maintaining a dividend yield of around 3.6%.
