The International Energy Agency (IEA) recently released its April oil market report. The global energy overseer expects oil demand to heat up this summer. That will come as supplies shrink after Saudi Arabia recently led a big production cut. 

These dueling forces should drive oil prices even higher in the coming months, and that makes a great time to buy oil stocks. Among the top ones to consider buying ahead of that rally are Devon Energy (DVN 0.19%), Diamondback Energy (FANG 0.32%), and Marathon Oil (MRO 0.11%). All three oil companies recently made acquisitions, bolstering their ability to cash in on higher crude prices. 

Drilling down into the latest oil market report

The IEA's latest forecast foresees global oil demand surging by 2 million barrels per day (BPD) to a record of 101.9 million BPD this year. Jet fuel demand is a big factor fueling the consumption increase, which the IEA expects will drive 57% of this year's expected growth. 

Meanwhile, the Saudi-driven production cut will weigh on supplies. The IEA wrote in its April report that the "surprise OPEC+ supply cuts announced on 2 April risk aggravating an expected oil supply deficit in 2H23 and boosting oil prices at a time of heightened economic uncertainty." It expects the global gap between supplies and demand to widen in the coming months and reach 2 million BPD by the third quarter. That wide gap could send crude prices from their current levels in the $80s to the $90-$100 a barrel range. 

In an even greater position to capitalize on the opportunity

Those higher oil prices will benefit all oil producers. However, some are in a better position to capitalize on higher crude prices because they have made meaningful acquisitions in recent months.

For example, Devon Energy made two bolt-on acquisitions last year. It spent $865 million to buy the leasehold interests and related assets of RimRock Oil & Gas to enhance its position in the Williston Basin. It followed that up with the acquisition of Validus Energy for $1.7 billion, boosting its position in the Eagle Ford. The company paid less than 2.2 times cash flow for these acquisitions. 

Those deals put Devon in an even stronger position to cash in on higher oil prices this year. That will give Devon more money to return to shareholders. It pays out 50% of its free cash flow in dividends and can return additional cash to investors through opportunistic share repurchases. 

Diamondback Energy also made two acquisitions last year to enhance its position in the Permian Basin. It bought FireBird Energy for $775 million in cash plus 5.86 million of its shares. It followed that up with the purchase of Lario Permian for $850 million in cash plus 4.18 million shares. The company expected the highly accretive deals would bolster its free cash flow at the oil price outlook at the time. With crude prices now likely to rally, they position the company to produce even more free cash flow this year. That would enable Diamondback Energy to return more cash to its investors. It sends them up to 75% of its quarterly free cash flows through a combination of dividends and repurchases. 

Marathon Oil also got into the acquisition game last year. It paid $3 billion to buy Ensign Natural Resources to bolster its position in the Eagle Ford. The highly accretive deal enabled Marathon Oil to increase its dividend by 11% following its closing based on its view of oil prices at the time. With crude prices poised to rally, Marathon will produce even more excess cash this year. That will give it more money to buy back shares. Marathon has retired an industry-leading 20% of its outstanding shares over the last several quarters. 

More fuel to capitalize on higher crude prices

Oil prices appear poised to heat back up this summer, with the potential to top $100 a barrel. That will enable oil companies to generate more free cash flow. Devon Energy, Diamondback Energy, and Marathon Oil are in even better positions to cash in on higher crude oil prices after they made acquisitions to boost their operations last year. They could produce strong total returns, making them great oil stocks to buy ahead of the oil price rally.