3 Energy Stocks That Could Rally If the Oil Bears Are Wrong

The recent decision by the OPEC+ nations to increase oil production is amplifying concerns about an oversupplied market. Adding to that belief is the growing hope that a peace deal, or at least a ceasefire, will be reached between Russia and Ukraine.

This macroeconomic story is the main reason energy stocks continue to be one of the worst-performing sectors. Oil stocks, in particular, have failed to rally despite steady cash generation.

However, the bear case for oil may now be too crowded. A closer look suggests demand is being underestimated, which could flip the script for energy stocks. That would make buying into this sector now a move that could pay off well in late 2025 and into 2026. Some of the best stocks to own are also considered the best-in-class.

The Bull Case for Higher Oil Prices

First, there’s the Federal Reserve. The CME FedWatch tool places the probability for a 25 basis point (0.25%) interest rate cut at 83.2%. Even if that’s the only cut in 2025, it would likely be enough to spur an increase in industrial activity, travel, and freight, all of which are bullish for oil.

Second, while the growth of data centers is part of the demand story, residential demand, in the form of electricity and heating fuels, shouldn’t be overlooked. Residential demand for electricity and heating fuels is sticky and seasonal. In some regions, oil-fired generation still plays a role, which means this consumption is less elastic than markets assume.

Third, the OPEC+ nations have been non-committal about supply increases after September. Tightening supply could also spur higher oil prices.

Finally, with or without a resolution to the Russia-Ukraine conflict, the market is likely to have geopolitical risks that could be present longer than expected. These include the possibility of higher tariffs on nations such as India.

A Test of Permian Growth and Refining Resilience

Chevron Corp. (NYSE: CVX) stock is up 7.7% in 2025 after a 9.9% increase since hitting a 52-week low in April. One reason for the recent change in sentiment is that the company's merger with Hess Co. (NYSE: HES) is now complete. This will give Chevron exposure to Guyana’s world-class oil reserves.

However, Chevron's key growth driver will continue to be its production in the Permian Basin. The company currently generates volumes between 800,000 and 850,000 barrels of oil equivalent per day (boe/d). Chevron continues to become more capital efficient with its assets in the basin, which it views as a key part of its growth story.

The Chevron analyst forecasts on MarketBeat give CVX stock a consensus price target of $164.11, an upside of 5%. However, several analysts have increased their price targets above the consensus price since the company’s earnings report on Aug. 1.

Turning Oil Demand Into LNG and Guyana Cash Flow

The Permian Basin is also a key part of Exxon Mobil Corp. (NYSE: XOM) bull case. Since completing its acquisition of Pioneer Natural Resources in 2024, the company has been the largest single operator in the region, generating approximately 1.6 million to 1.8 million boe/d per day. Exxon Mobil plans to increase that volume to approximately two million boe/d by 2027.

However, beyond the Permian, higher oil prices are likely to bring better LNG prices and a faster payback from its Guyana operations.

XOM stock is down approximately 0.75% in 2025, and despite a spike in April 2025, it has been trading in a range. Analysts have a consensus price of $125.84, which provides a 17% upside in addition to a dividend that pays a 3.71% yield.

A High-Beta Play on a Long-Cycle Upturn

Schlumberger (NYSE: SLB) is a solid choice for investors looking for more risk-reward in the oil sector. Oilfield services stocks like Schlumberger are more volatile than the integrated majors, but they also offer greater upside if demand surprises.

That’s particularly true of Schlumberger, which relies on projects that run over several years. If demand surprises to the upside, SLB’s international backlog could unlock the strongest high-beta gains in the sector.

The company provides the “picks and shovels” that upstream oil producers need in their operations. Demand was strong in 2024 but has not kept pace in 2025, reflected in the SLB stock price, which is down 12.8% in 2025.

However, the analyst forecasts on MarketBeat have a consensus price target of $49.28 on SLB stock, an increase of over 47%.

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