Canadian energy stocks are down considerably in 2025. Contrarian investors are wondering which top TSX oil and gas stocks might now be undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio.

Oil outlook

West Texas Intermediate (WTI) oil trades near US$61 per barrel at the time of writing. That's down from US$85 a year ago. The decline is largely due to weak demand in China and rising output in non-OPEC countries, including Canada and the United States. Tariff threats and, more broadly, the risk of a global recession have pushed oil prices even lower in recent weeks. OPEC's recent decision to increase supply has also been a headwind.

Analysts expect the market to remain oversupplied through 2026. The extent of the glut and its impact on prices will depend largely on whether a prolonged trade war can be avoided.

A reasonable and timely trade agreement could put a new tailwind behind oil prices. A protracted and costly trade battle that drives the global economy into a recession could send oil prices to lows not seen since the pandemic.

In the current market environment where oil prices are under pressure, it makes sense to look for larger names with strong balance sheets that can ride out an extended period of market weakness.

Canadian Natural Resources

CNRL (TSX:CNQ) trades near $38 per share at the time of writing compared to $45 a few weeks ago. The stock is down 14% in 2025 and dropped 29% over the past 12 months.

Sliding oil prices over the past year and a big acquisition in 2024 are primarily responsible for the decline. CNRL purchased Chevron Canada's assets last fall for US$6.5 billion in a cash deal that added significant production and reserves to the asset portfolio. CNRL took on new debt to finance part of the purchase, which means it will take longer for the company to reach its net debt targets before handing out more cash to shareholders in the form of dividends and share buybacks. The board did, however, boost the dividend by 7% for 2025.

CNRL has a good track record of making strategic acquisitions at opportune moments to drive long-term growth. The Chevron Canada deal might look a bit expensive right now, but it could turn out to be a big winner in the long run.

CNRL's extensive natural gas production helps offset volatility in the oil market. Natural gas demand is expected to grow in the coming years as gas-fired power facilities come online to provide electricity for artificial intelligence data centres in domestic and international markets.

At the current share price, investors can get a dividend yield of 6.2% from CNQ stock.

Suncor

Suncor (TSX:SU) has made good progress on its turnaround plan over the past couple of years. The company reduced expenses while driving production and refinery throughput to record levels.

Suncor's integrated business structure has always been a reason to consider the stock for an energy portfolio. The company is known for its oil sands production assets, but it also has large refineries that turn the crude oil into fuels and plastics. In addition, Suncor's  Petro-Canada service stations sell gasoline and diesel fuel. When oil prices fall, the refining and retail businesses can benefit and help offset the margin hit in the upstream operations.

Suncor raised the dividend by 5% for 2025 and plans to return more excess cash to shareholders through buybacks now that net debt is down to the $8 billion target.

Suncor trades near $46 per share compared to the 2025 high of around $58. Investors can get a dividend yield of 4.9% at the current level.

The bottom line on Canadian energy stocks

Near-term market volatility is expected, and energy stocks could go lower in the coming months. However, long-term oil and gas bulls might want to start nibbling on Suncor and CNQ at these levels and look to add to the positions on any downside. The dividends should be safe and pay you well to ride out the turbulence.