Stock Analysis & Ideas

OPEC+ Production Cut: Watch These Energy Stocks Boom

Story Highlights

The ongoing Russia-Ukraine crisis and the newly announced OPEC+ decision to cut oil production by 2 million barrels a day has given another reason for investors to stay bullish on the energy space.

Wednesday witnessed a strong rally in energy stocks following the news that OPEC+ has agreed to cut oil production by 2 million barrels a day. The move is the biggest cut in over two years and may mean higher oil prices in the days to come. That could mean a boon for energy stocks, which are already on the rise; OXY stock, XOM stock, and SLB stock are likely beneficiaries of OPEC+’s decision.

OPEC+, or the Organization of the Petroleum Exporting Countries, is an alliance of oil-producing countries that controls more than half of the world’s oil output. The production cut clearly indicates the alliance’s intent to keep the oil prices elevated in the near future. Russia is considered to be one of the biggest beneficiaries of the move.

Disappointed by the move, the U.S. President ordered a release of 10 million barrels of oil from the Strategic Petroleum Reserve, as reported by the WSJ.

Oil prices crossed $120 mark earlier this year but are now trading at $88 levels currently. Let’s take a look at Wall Street analysts’ ratings for three major energy companies that could benefit from higher oil prices in the coming days.

Occidental Petroleum (NYSE:OXY)

Warren Buffet’s favorite oil stock, Occidental Petroleum (NYSE:OXY) gained 2.4% yesterday on the news. Based in Texas, U.S., Occidental Petroleum Corp. engages in the exploration and production of oil and natural gas.

Is OXY Stock a Good Buy?

Despite the fact that Occidental Petroleum stock more than doubled over past year, the Street continues to be bullish on OXY with some caution. Overall, the stock commands a Moderate Buy consensus rating based on five Buys, seven Holds, and one Sell. Occidental Petroleum’s average price target of $76.67 implies 13.18% upside potential from current levels.

Notably, OXY stock has a top-notch Smart Score of a “Perfect 10” on TipRanks. Further, OXY stock has a very positive signal from hedge fund managers, who added 18.8 million shares during the last quarter.

On top of that, insiders as well as retail investors are bullish on the stock. TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on OXY, with 3.6% of investors on TipRanks increasing their exposure to the stock over the past 30 days.

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Exxon Mobil (NYSE:XOM)

Also based in Texas, U.S., Exxon Mobil Corp. (NYSE:XOM) engages in the exploration, development, and distribution of oil, gas, and petroleum products. Yesterday, XOM shares gained 4% on the OPEC+ news as well as optimistic Q3 update provided by the company.

Exxon stated that the third-quarter earnings will benefit from higher natural gas prices, offsetting the impact of lower prices for oil and liquids as well as a decline in refining and chemical margins compared to the second quarter.

Is XOM a Buy or a Sell?

As per TipRanks, analysts are cautiously optimistic about the stock and have a Moderate Buy consensus rating, which is based on seven Buys and three Holds. Exxon Mobil stock’s average price forecast of $109.05 implies 10.02% upside potential. XOM shares have rallied 64% over the past year.

XOM stock boasts a score of 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

Schlumberger (NYSE:SLB)

Schlumberger (NYSE:SLB) shares gained 6.3% yesterday over dual news of OPEC+ production cut as well as a new partnership agreement signed with Gradiant, a global water solutions provider, over sustainable battery-grade lithium compounds production.

Based in Texas, U.S., Schlumberger is an oilfield services company, which provides technology for reservoir characterization, drilling, production and processing to the oil and gas industry.

Will Schlumberger Stock Go Up?

As per TipRanks, SLB stock has an average price forecast of $50.25, which implies 20.88% upside potential. The highest price target of $61 implies an upside potential of 46.74% while the lowest price target of $43 presents a upside of 3.4%. Shares of SLB have gained almost 40% over the past twelve months.

The Wall Street community is clearly optimistic about the stock. Overall, the stock commands a Strong Buy consensus rating based on 12 unanimous Buys. Schlumberger’s average price target of $50.25 implies 20.88% upside potential from current levels.

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Concluding Thoughts

All the above mentioned stocks, which have exposure to oil and gas, are bound to benefit from the persistent energy demand and higher prices foreseen in the coming months.

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