Cold Front, Hot Stocks: Diesel Prices Propel Energy Leaders

Diesel Market Dynamics - Diesel prices surged due to forecasts of an extremely cold winter and rising natural gas prices, with the average retail diesel price increasing by $0.027 to $3.503 per gallon [1] - Ultra-low sulfur diesel (ULSD) futures rose by $0.055 per gallon to $2.2995, marking a 2.44% gain and the highest settlement since November 5th [1] - Natural gas prices on the Chicago Mercantile Exchange (CME) increased by almost 152% since March 26th, impacting the transportation sector and broader economy [2] - U.S. inventories of non-jet distillates stood at 116.5 million barrels as of December 20, 2024, significantly lower than the five-year average of 125.4 million barrels [3] - Rising diesel demand, driven by cold weather forecasts and low supply, creates a favorable environment for energy companies [3][4] Chevron Corporation - Chevron is the second-largest integrated oil company in the U.S. with a market capitalization of around $265 billion and global operations [6] - The company reported Q3 2024 earnings of $4.5 billion and a record cash flow from operations of $9.7 billion, with a quarterly dividend of $1.63 per share [7] - Chevron is targeting $2-3 billion in structural cost reductions by the end of 2026, including a $0.7 to $0.9 billion after-tax restructuring charge in Q4 2024 [8] - The company announced the sale of its Canadian assets for $6.5 billion as part of its portfolio optimization strategy [8] ExxonMobil Corporation - ExxonMobil is one of the world's largest publicly traded energy companies with a market capitalization of around $475 billion [10] - The company reported Q3 FY2024 earnings of $8.6 billion, or $1.92 per share, and achieved a record liquids production of 3.2 million barrels per day [10] - ExxonMobil declared a Q4 dividend of $0.99 per share, a 4% increase, and plans to repurchase over $19 billion of shares in 2024 [12] - The company has achieved $11.3 billion in cumulative structural cost savings and aims to deliver $15 billion in savings by the end of 2027 [13] Investment Opportunities - The surge in diesel prices presents a compelling investment opportunity in energy stocks, particularly for Chevron and ExxonMobil [14] - Both companies are well-positioned to benefit from increased diesel demand due to their strong financial positions, diversified operations, and commitment to dividend growth [14][15] - Chevron and ExxonMobil offer a balance of income and growth potential, making them suitable for beginner to intermediate investors navigating the dynamic energy market [15]