Oil prices have been steadily increasing in recent years, and it seems they will continue for a while. Demand is at an all-time high due to geopolitical instability, and prices have followed suit. This has led to inflation and eroding consumer confidence. But it has also been a boon for oil stocks. With tensions showing no signs of easing, now is the time to buy oil stocks.

Many people believe that oil stocks are a wise investment. After all, oil is an essential commodity that is used in a wide range of industries, from transportation to manufacturing. Additionally, oil stocks offer the potential for high returns. When oil prices rise, oil stocks usually go up as well. And since oil is a finite resource, there’s a limited supply available on the market. This combination of strong demand and limited supply could lead to big profits for investors in oil stocks. However, there are also some risks associated with oil stocks. For instance, the oil price is highly dependent on global events, which can be difficult to predict.

Additionally, oil stocks tend to perform poorly during periods of economic recession. Despite these risks, many investors still believe that oil stocks offer good potential for long-term growth.

On balance, though, there are indicators that 2023 will be a better year for markets. Armed with data going back decades, InvestorPlace Senior Investment Analyst Luke Lango predicts we will see a bull market after the midterms. And if you are concerned because of a divided government, then don’t be. As Samuel O’Brient writes, gridlock is good for the stock market because it produces stability. That is the one thing the stock market just loves.

So if you’re looking for an investment with high growth potential, oil stocks are worth considering. Just be sure to do your research before investing. And always remember to diversify your portfolio to reduce your risk.

ExxonMobil (XOM)

The third quarter has been the best this year for ExxonMobil (NYSE:XOM). With a net profit of $19.66 billion or $4.45 per share after adjustments, 10% more than the last quarter, it’s easy to understand why the oil major is having such a good time these days and why their balance sheet is looking so robust already with a free cash flow of $22 billion.

ExxonMobil returned $8.7 billion in total to its shareholders in the recent quarter, with about $4.5 billion coming from share buybacks and dividends of $3.7 billion. The company is not stopping there and has plans to buy back $30 billion worth of shares by the end of 2023. With $10.5 billion already spent this year, the company is well on its way to meeting its target.

Investors are convinced with the stock as it raised its dividends in Q3 by $0.03 per share to $0.91 per share. Furthermore, the company paid off $1.2 billion of its debt, bringing its debt-to-capital ratio to 19%.

The company’s bright future is due to its cost-cutting plans, portfolio diversification, and high oil refining capacity. In Q3, production was at 4.2 million barrels per day – a substantial uptick of 177,000 barrels from last quarter alone.

Additionally, as the world moves towards a net-zero-emissions future, ExxonMobil is positioning itself as a leader in the transition. The company has made significant investments in low-carbon technologies, and its subsidiary, Imperial Oil, is already producing renewable diesel using hydrogen from Air Products. This position will become even more advantageous if oil prices drop in the future, as ExxonMobil can compete on both price and emissions. All of this means Exxon is one of the oil stocks to buy heading into 2023.

Occidental Petroleum Corporation (OXY)

Occidental Petroleum Corporation (NYSE:OXY) announced its Q3 earnings results, reporting a GAAP EPS of $2.52, up from the estimated $2.41. The company’s cash flow from continuing operations was $4.3 billion, and its free cash flow was $3.6 billion. Occidental Petroleum Corporation retired $1.3 billion of its debt and spent $1.8 billion in buying back its 28.4 million shares in the quarter. Occidental Petroleum Corporation’s strong performance in the quarter was driven by higher oil and gas prices and greater operational efficiency. The company’s disciplined approach to capital allocation resulted in strong free cash flow generation, which allowed Occidental Petroleum Corporation to retire debt and repurchase shares. Occidental Petroleum Corporation’s focus on shareholder value will continue to drive strong performance in the quarters ahead.

Apart from that, by the end of September, the company had $1.2 billion in cash and liquid assets. The company produced 1,180 thousand barrels of oil equivalent per day (Mboed), handily outpacing guidance.

Meanwhile, the company is optimistic about its chances to become a leader in the carbon trading market, with new emissions reduction technology and a new plant. That gives one more reason for investors to pick this one up if they are looking for oil stocks to buy.

The extracted carbon will be transported and used in Enhanced Oil Recovery (EOR). The carbon will be injected into emptying old oil reservoirs and wells through EOR to repressurize the field and produce more oil. The company plans on opening around 70 such facilities by 2035.

The management sees carbon capture and sequestration as a great opportunity worth up to $5 trillion. OXY partnered with Western Midstream Partners to produce and transport low-carbon intensity oil products in pursuit of this goal.

Diamondback Energy (FANG)

Diamondback Energy (NASDAQ:FANG), one of the largest oil producers in the U.S., reported an adjusted net income of $6.48 per share, outpacing Wall Street expectations. The revenue of $2.44 billion beat the analysts’ estimate by $20 million. The free cash flow for the quarter was nearly $1.2 billion, which the company used to reward investors. Diamondback Energy paid out $403 million in dividends and spent $472 million on buying 4 million shares at an average price of about $120 a share.

The company raised its full-year guidance to 385,000-386,000 barrels of oil equivalent per day (BOE/d).

Diamondback raised its capital expenditure guidance to $1.94 billion-$1.95 billion from $1.82 billion-$1.90 billion due to investment in FireBird Energy for $775 million in cash and 5.86 million shares. Under the acquisition, Diamondback Energy will come in with an estimated 316 drilling locations on 68,000 acres.

Diamondback Energy is doing a good job of staying profitable and being nimble in the market. This is why it is one of the best oil stocks to buy, despite the stock price increasing by almost 50% over the last year. Despite the steep rise in stock prices, shares still have an upside, according to TipRanks. The stock holds a Strong Buy rating, with a price target of $183.47 a pop, translating to a 15% upside per the latest recorded price.

On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.