Marathon Oil (MRO) vs. Marathon Petroleum (MPC): Which Energy Stock Has the

A pickup in demand for oil and gas and constrained supplies amid production cuts will likely push crude prices higher, driving strong investor interest in the energy sector. Thus, energy stocks Marathon Oil (MRO) and Marathon Petroleum (MPC) are well-placed to gain robust momentum in the near term. But which of these stocks is a better buy now? Read more to find out….

In this article, I evaluated two energy stocks, Marathon Oil Corporation (MRO) and Marathon Petroleum Corporation (MPC), to determine which has the potential for solid momentum the following month. We believe MPC is the better investment for reasons explained throughout this piece.

Robust demand for oil and gas combined with tight supplies amid several output cuts are recently causing oil prices to climb. According to the International Energy Agency’s (IEA) latest monthly Oil Market Report (OMR), global oil demand is scaling record highs, driven by solid summer travel, increased oil use in power generation, and soaring petrochemical activity in China.

World oil demand is expected to expand by 2.2 million barrels per day (mb/d) year-over-year to 102.2 mb/d in 2023, with China accounting for more than 70% of growth.

However, per IEA, global oil supply slumped by 910 kb/d to 100.9 mb/d last month. In July, a significant reduction in Saudi oil production saw output from the OPEC+ drop 1.2 mb/d to 50.7 mb/d. Further, the almost 1 mb/d voluntary crude output cut, which was also implemented in July and August, will be extended into September, the state-owned Saudi Press Agency (SPA) stated.

“In effect, the Kingdom’s production for the month of September 2023 will be approximately 9 million barrels per day,” SPA said, citing a source from the Saudi Ministry of Energy.

At the same time, Russia announced plans to slash oil exports by 300,000 barrels per day in September.

Robust oil demand and production cuts prompted analysts to update their price forecasts. Goldman Sachs projects record demand in oil markets and tight supplies to push crude prices higher in the near term.

Goldman’s head of oil research, Daan Struyven, said, “We expect pretty sizable deficits in the second half with deficits of almost 2 million barrels per day in the third quarter as demand reaches an all-time high.” He added that the investment bank forecasts Brent crude to rise to $86 per barrel by year-end.

Further, the Wall Street Bank expects crude prices to surge to $93 per barrel in the second quarter of next year as supply deficits continue.

The Energy Information Administration (EIA) also projects Brent crude oil prices to average $86 in the second half of this year, an increase of about $7 from the previous forecast.

The prevailing market conditions should help energy stocks MRO and MPC gain robust momentum in the near term.

MPC is a clear winner in six-month price performance, with 15.9% returns compared to MRO’s 3.9% gain. MPC has gained 17.5% over the past nine months, while MRO plunged 12.3%. Also, MRO’s 23.1% year-to-date gains are significantly higher than MRO’s decline of 3.4%.

Here are the reasons why we think MPC could perform better in the near term:

Latest Developments

On March 30, MRO, through its affiliated company Marathon E.G. Holding Limited, announced it had signed a Heads of Agreement (HOA) with the Republic of Equatorial Guinea (E.G.) and Noble Energy E.G. Ltd, a Chevron company, to progress the following phases (Phases II and III) in the development of the Equatorial Guinea Regional Gas Mega Hub (GMH).

“This announcement builds on our successful partnership of more than 20 years with the E.G. Government, further leveraging and extending the life of E.G.’s world-class gas monetization infrastructure, including the critical E.G. LNG facility, into the next decade,” said Lee Tillman, MRO’s Chairman, President, and CEO.

On March 8, MPC announced the acquisition of a 49.9% interest in LF Bioenergy, an emerging producer of renewable natural gas (RNG) in the United States, from Cresta Fund Management for $50 million. LF Bioenergy has been focused on developing a portfolio of dairy farm-based, low-carbon intensity RNG projects.

This acquisition demonstrates MPC’s commitment to lower carbon investments. Further, this platform would create the opportunity for integration and advance the company’s goal to lower the carbon intensity of its operations and product offerings.

Recent Financial Results

MRO’s revenues and other income decreased 34.3% year-over-year to $1.51 billion in the second quarter that ended June 30, 2023. Its income from operations declined 64.9% from the year-ago value to $454 million. In addition, the company’s adjusted net income and adjusted net income per share were $295 million and $0.47, down 68.4% and 63.6% year-over-year, respectively.

For the second quarter that ended June 30, 2023, MPC’s Midstream segment income from operations increased 6.7% year-over-year to $1.20…