Yesterday (October 23), the price of Brent crude rose 4% to over $65 a barrel as renewed tensions between Russia and the US sparked a buying frenzy. If there are additional restrictions on Russian oil companies and other oil-related sanctions imposed by other countries, there is the potential for larger and more sustained moves in the oil market. As a result, I did some research FTSE100 companies that could do well on higher oil prices.

Main beneficiary

First there is Shell (LSE:SHEL). The company’s shares rose 3% yesterday, highlighting its correlation with oil prices. The share price has increased by 8% over the last year.

As a company, Shell benefits from higher oil prices in several ways. It is an integrated oil company with significant upstream production, so a higher oil price tends to boost cash flow and profits from the upstream sector. In other words, Shell deals directly with crude oil, so it naturally benefits when the commodity it produces increases in value. It also conducts vast trading and refining activities. So supply disruptions caused by sanctions can often augment profit margins in refining and trading.

Of course, a one-day augment in oil prices will not translate into a vast augment in the next quarterly report. However, if oil prices rise further or even remain at current levels in the coming weeks, it could facilitate have a more significant impact on Shell’s finances.

One risk is that oil prices are also influenced by OPEC+, the oil governing body. They have the power to adjust supply levels. If they actually augment supply, it could push oil prices down again. This would then be a negative catalyst for Shell shares.

Indirect exposure

The second option is Glencore (LSE:GLEN) Shares rose yesterday but are down 16% over the past year. It allows us to express in a slightly more indirect way the idea that oil will continue to rise. It is one of the world’s largest commodity traders and has significantly increased its oil and gas trading volume in recent years. So, while it has a diversified commodity portfolio, a rise in oil prices would still have the effect of boosting profitability.

An additional advantage for Glencore over Shell is that traders and diversified commodity groups (like Glencore) can profit from volatility and vast price swings. So even if oil prices rise or fall intermittently, the company can make money on price changes, not just whether the price goes up. This differs from a manufacturer such as Shell, which relies more on upstream production prices.

Coal may be a concern for investors. Unlike oil, coal prices are low, hurting profits despite Glencore acquiring more coal assets.

Overall, both stocks could do well if the price of oil continues to rise and investors could therefore consider them.