Morgan Stanley cites Occidental as beneficiary of oil prices

Morgan Stanley analysts see Brent crude oil prices hitting $100 in the second half of the year, and they name five global stocks that can benefit, including Occidental Petroleum (OXY) – Get the Occidental Petroleum Corporation report.

Brent crude recently traded at $90.58, up 1%. It will reach $100 thanks to low inventories, low spare capacity and low investment, according to analysts, led by chief commodities strategist Martijn Rats, CNBC Reports.

As for the five stocks, in addition to rising oil prices, they can benefit from “bottom-up triggers” including volume growth, asset disposals and dividend increases, analysts said.

The other four stocks are British oil giant Shell (RYDAF) Australian natural gas producer Santos SSLZY, China National Offshore Oil Corporation (CNOOC) and Russian gas titan Gazprom.

As for Occidental, it has “inordinate leverage” on rising oil prices, Morgan Stanley analysts said. It has also significantly reduced its risk since losing its investment grade credit rating in 2020, they said. The company’s Low Carbon Ventures business provides a “potential pillar for long-term growth,” analysts said.

As for Shell, its dividend “will likely grow much faster” than the company predicts, Morgan Stanley analysts said. And they predict it will buy back up to 6% of its outstanding shares.

Analysts also noted that the company’s valuation is low relative to its past average and relative to Shell’s competitors.

As for Santos, its recent merger with Oil Search, which was the largest oil and gas company based in Papua New Guinea, gives the Australian company liquid natural gas projects in Australia, Papua New Guinea and Alaska, analysts said.


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Felix J. Dixon