NEW YORK (TheStreet) -- The outlook for crude is optimistic with the December 2011 futures contracts touching $100 a barrel on Nov. 24, according to Bloomberg data. A bullish outlook for crude oil augurs well for energy stocks, especially since the sector took a beating after a BP (BP) deepwater oil rig exploded in the Gulf of Mexico -- one of the biggest natural disasters to date. Crude is up 7%-8% this year, although experts foresee prices hitting $100 a barrel next year as spare production capacity shrinks on accelerating demand.
Positive U.S. economic releases, a stable China and India growth rates could support the spike in crude oil prices. However, slower euro zone growth could dampen the uptrend. Nevertheless, the Energy Select Sector SPDR (XLE) is outperforming the SPDR S&P 500 ETF (SPY), delivering year-to-date returns of 10% and 7%, respectively.
We have selected eight energy ADRs with potential upsides. These oil companies have strong fundamentals and earning prospects. Companies like Eni (E) could grab headline news as the government of Italy plans to sell its stake in the company. In contrast, Total (TOT), Repsol YPF (REP), Royal Dutch Shell (RDS.A) and Statoil (STO) have attractive dividend yields of 4.7%, 5.9%, 5.5% and 4.6%, respectively. Better dividend yields could make long-term investments in these companies productive, especially given the volatile market conditions.
Several companies like BG Group (BRGYY), OGX Petroleo (OGXPY) and Petroleo Brasileiro (PBR) have expansion plans from several exploratory wells in Brazil. This augurs well for these companies as newer capacities would boost their earnings profiles in the long term. China Petroleum & Chemical Corporation (SNP) expects production from Puguang's main block to continue for more than 20 years. The stocks are stacked by upside, great to greatest.
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