Occidental Petroleum Stock News and Analysis: Can OXY launch another 17%?

Occidental Petroleum stock (OXY) turned quite a few heads last Friday with its 17.6% rally. This large oil & gas independent company should greatly benefit from rising oil prices caused by Russia's invasion of Ukraine and subsequent Western sanctions placed on Russia due to the war. West Texas Intermediate (WTI) oil rallied to $115 on Friday, briefly touched $130 on Monday, and now has backtracked to $123.50 at the time of writing. News that Carl Icahn has relinquished his activist stake, Warren Buffet has taken a $5 billion position, and the US and EU governments contemplating an outright ban on Russian crude are all adding to the bullish sentiment.

Occidental Petroleum Stock News: Russian oil ban could send oil to $200

First, Occidental has about $30 billion in debt on its balance sheet, as of the end of the fourth quarter, and observers view extremely high oil prices as a boon for overleveraged O&G producers like OXY.  Occidental can use its windfalls to reduce its debt and maybe even buyback shares. At the end of February, CEO Vicki Hollub said Occidental has "no need and no intent to invest in production growth." Instead, it would focus entirely on reducing debt and "rewarding" shareholders.

Second, on Sunday an outright ban on Russian oil became a real possibility. Antony Blinken, the US Secretary of State, told a journalist, “We are now in very active discussions with our European partners about banning the import of Russian oil to our countries, while of course at the same time maintaining a steady global supply of oil."

What is of note to anyone who understands global oil dynamics is that banning Russian oil would make it impossible to maintain "a steady global supply of oil." Alongside the United States and Saudi Arabia, Russia is one of the big three producers in the world. Bank of America put a figure on it: banning Russian oil would mean a 5 million barrel daily shortfall that would translate to around $200 a barrel price for crude.

Third, famed activist investor Carl Icahn has sold out of his entire stake in OXY. This is good for investors since Icahn has been depressing the share price for some time by continued selling. Icahn bought shares of OXY in 2019 and at one time had 10% of the company and two board seats. He was trying to pressure the management over their $38 billion buyout of Anadarko Petroleum. The estimate is that is walking away with a profit somewhere north of $1 billion.

Fourth, Warren Buffet's Berkshire Hatheway seems to be the primary bidder in the past week. Between Wednesday and Friday, it appears from Securities & Exchange Commission (SEC) filings that Berkshire purchased some 60 million shares. This adds to the nearly 30 million shares of OXY that Berkshire owned previously. The Oracle of Omaha also owns $10 billion stock separately and approximately 84 million warrants to purchase more OXY at $59.62 a share. Shares closed at $56.15 on Friday. With a penchant for holding long term, the market will smile greatly on this news.

OXY key statistics

Occidental Petroleum Stock Forecast: $78.09 holds the target

First things first, a look at the weekly chart below for OXY demonstrates long-term support at $40. This goes back even to 2008. The most relevant chart details, however, are where OXY may experience resistance in the event that higher oil prices spur a continued bull run. First, there is $58.22. This price served as support in 2016, 2017, and 2018. Then there is $63.66, which did the same in 2011, 2015, and March 2018. The most significant price of all in the event of a Russian oil ban would be $78.09. Here OXY found stiff resistance throughout 2016 and again in January 2018. Use these prices as a guide when deciding where to take profits.

OXY weekly chart