Suncor Energy (TSX:SU) was one of the outperformers in the post-pandemic world. Oil prices picked up momentum in 2021. Then came the Russia-Ukraine war and the war in the Middle East. Escalating tensions in the oil-rich countries increased uncertainty in oil supply and kept oil prices above US$70.
The rising interest rates of the West reduced oil demand and tried to pull down the oil price below US$70. However, oil couldn’t sustain that level as the Organization of the Petroleum Exporting Countries (OPEC) lowered supply to keep the oil price above US$70/barrel. Canadian oil producers were the biggest beneficiaries as they did not face the risk of war but were able to sell oil at a higher price.
Now the question is, what does 2025 have in store for Suncor and other oil stocks?
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Is Suncor stock a buy for 2025?
While 2021 and mid-2022 saw oil stock prices appreciate triple-digit, their ascenscion plateaued in 2022. When you look at oil stocks, it is important to understand the nature of commodities. Commodity prices are cyclical and depend on demand and supply. The price can only rise to a certain level as that is the highest anyone is willing to pay for the commodity. If the price rises beyond that level, it hurts demand and people look for alternatives.
For oil, that level was US$125, which it reached in June 2022. Since then, oil stocks haven’t seen much appreciation in the price. Oil stocks became range-bound, with Suncor’s range at $40–$54. To make money in range-bound stocks in the short term, you could buy when the stock is near the lower range and sell it near its higher range.
At present, Suncor Energy stock is trading in the higher range, which means it is not a good idea to buy now. In 2025, you can expect the stock to remain range-bound amid tensions in the Middle East. If you want to buy Suncor stock, consider buying it at a $40–$44 price.
Is Suncor stock a sell for 2025?
Unless the war eases or a global recession hits, oil prices are unlikely to fall below US$70. Goldman Sachs has reduced the probability of a US recession in the next 12 months to 15% from the earlier projection of 20%. So far, there are no signs of a cyclical downturn in the oil industry, which means the stock could continue to trade above $40 and around the $50 range.
If you purchased the stock in 2021 with the intention of making capital gains, you could sell it at the current price of $54 as it has little upside. You would be better off buying growth stocks like Descartes Systems or Dye & Durham, which are seeing double-digit revenue growth.
Is the stock a hold for 2025?
But if you purchased Suncor stock for its dividend, you could consider holding it for 2025. The company has been earning good profits and sharing them with its shareholders through incremental dividends. The next year will likely be a good year for oil and gas as economic recovery could drive oil demand and an ease in interest rates could reduce interest expense and boost profits for Suncor.
Final takeaway
The above discussion shows that you don’t need 20 to 30 stocks in your portfolio to make money. You can earn money from five to six stocks by buying the dip and selling the high. You can either master 5 stocks and keep your money rolling in them or you can invest in 20 stocks and hold them for the long term and balance one stock’s downturn with another stock’s upturn.
