ASX 200 energy shares have been hit hard in 2020. First, there were concerns surrounding coronavirus which sent the S&P/ASX 200 Index (ASX: XJO) tumbling lower in late February. Then came an oil price war between Saudi Arabia and Russia which spooked investors even more and eventually sent the oil price into negative territory last month.
You might be looking at the markets and thinking now is not a good time to buy ASX 200 energy shares. However, I think it could be quite the opposite. Here are a couple of my top picks for energy companies that could be in the buy zone in 2020.
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2 ASX 200 energy shares to buy today
I like the prospects for AGL Energy Limited (ASX: AGL) shares. AGL is one of the largest energy producers in Australia and I believe it's in a strong competitive position.
The Aussie electricity market is largely dominated by AGL, EnergyAustralia and Origin Energy Ltd (ASX: ORG). The AGL share price has plummeted 21.28% lower this year but I feel it may have been oversold.
Sure, the oil price war has hurt most ASX 200 energy shares. However, east coast electricity prices remain high, despite the ACCC recommending further intervention. These ongoing high prices could help stabilise FY20 earnings despite potentially lower volumes.
Another issue affecting the sector is less commercial energy use. COVID-19 restrictions have forced many employers towards a remote working model which means less energy consumption by businesses in our cities. However, this also means higher residential energy use which could help to balance things out for AGL.
Aside from AGL, I also like the look of Origin Energy. Given what's happening to oil prices and the supply-demand dynamics, I think investing in the ASX 200 oil producers is a risky bet. There's a lot of uncertainty surrounding oil and, as such, I feel Aussie utility companies could be a better option right now. As a long-term investor, I'm happy to trade some potential upside for the defensive qualities I see in energy 'gentailers' like AGL and Origin.
I think Origin is in a similar position to AGL right now. Given we're investing for the long-term, I also think both AGL and Origin could benefit from an increase in renewable energy investment. That means, moving forward, AGL and Origin could tick all the boxes as strong dividend shares with solid medium and long-term outlooks.
Foolish takeaway
Investing in ASX 200 energy shares is certainly not for everyone. Diversification is key, which means that AGL and/or Origin shares could form part of your broader portfolio construction. I would say it's still a relatively speculative play right now which means I wouldn't be going all in. However, I do feel there are long-term rewards on offer for investors willing to roll the dice with ASX 200 energy shares in 2020.
