Impact of Rising Oil Prices on Chevron
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 6 days ago
0mins
Source: Fool
- Surging Oil Prices: The ongoing conflict with Iran has pushed Brent crude prices above $110 per barrel, marking a nearly 90% increase this year, which could have significant implications for the global energy market, particularly for companies like Chevron that are sensitive to oil price fluctuations.
- Cash Flow Projections: Chevron anticipates generating an incremental $12.5 billion in free cash flow this year if oil averages $70 per barrel, and with current prices being double that, the company is positioned to significantly enhance its cash flow, thereby supporting its capital expenditures and dividend payments.
- Profitability Fluctuations: Despite rising oil prices, Chevron's profits fell in the first quarter due to timing mismatches related to financial derivatives, but as it delivers those products in the future, earnings and cash flow are expected to improve, showcasing the company's potential in a high-price environment.
- Market Outlook: While the market generally expects oil prices to remain elevated this year, Chevron's ability to sustain capital spending and dividends even at sub-$50 oil levels demonstrates its resilience and long-term growth potential in a volatile market.
Trade with 70% Backtested Accuracy
Stop guessing "Should I Buy CVX?" and start using high-conviction signals backed by rigorous historical data.
Sign up today to access powerful investing tools and make smarter, data-driven decisions.
Analyst Views on CVX
Wall Street analysts forecast CVX stock price to fall
19 Analyst Rating
15 Buy
4 Hold
0 Sell
Strong Buy
Current: 181.620
Low
158.00
Averages
176.95
High
206.00
Current: 181.620
Low
158.00
Averages
176.95
High
206.00
About CVX
Chevron Corporation is an integrated energy company. The Company produces crude oil and natural gas; manufactures transportation fuels, lubricants, petrochemicals and additives; and develops technologies that enhance its business and industry. The Company’s segments include Upstream and Downstream. Upstream operations consist primarily of exploring for, developing, producing and transporting crude oil and natural gas; liquefaction, transportation and regasification associated with LNG; transporting crude oil by major international oil export pipelines; processing, transporting, storage and marketing of natural gas; carbon capture and storage; and a gas-to-liquids plant. Downstream operations consist primarily of the refining of crude oil into petroleum products; marketing crude oil, refined products, and lubricants; manufacturing and marketing of renewable fuels, and transporting of crude oil and refined products by pipeline, marine vessel, motor equipment and rail car.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Oil Stocks Surge Amid Ongoing Conflict in Iran
- Shareholder Return History: Chevron has returned over $5 billion in capital to shareholders over the last 16 quarters, with $3.5 billion allocated to dividends, demonstrating the company's ability to consistently reward investors even in volatile markets, thereby enhancing investor confidence.
- Low Break-even Point: Chevron maintains a break-even price of $50 per barrel for Brent crude oil, thanks to investments in high-quality assets and disciplined cost management, allowing it to generate higher free cash flow in the current environment where prices are nearing $100 per barrel.
- Optimistic Market Outlook: The U.S. Energy Information Administration projects oil prices could peak at $115 per barrel in the second quarter and not fall below $90 until the fourth quarter, providing a strong tailwind for Chevron's earnings and further solidifying its position in the energy market.
- Investment in High-margin Assets: Chevron focuses on high-margin assets such as the Permian Basin and the Gulf of Mexico, successfully integrating Hess to gain a 30% stake in the Stabroek Block, ensuring future growth potential and competitive strength in the market.
See More
Oil Majors Brace for Market Turbulence
- Supply-Demand Crisis: The near-total closure of the Strait of Hormuz since February 28 has led to a more than 13% reduction in global oil supply and about a fifth drop in LNG flows, pushing crude prices above $100 per barrel and forcing companies to seek alternative supplies, impacting long-term market stability.
- Cautious Investment Stance: Despite BP, Chevron, and Exxon Mobil exceeding first-quarter earnings expectations, none of the five major oil companies have raised spending plans for 2026 or beyond, reflecting a boardroom shift towards capital discipline and prioritizing shareholder returns over expansion.
- Price Volatility Risk: Brent crude prices have swung violently since the war began, peaking at $118 per barrel in March before slipping back to around $100, indicating heightened uncertainty over future prices, compelling companies to ensure profitability amid volatility.
- Future Investment Outlook: While spending is expected to rise between 2026 and 2030, recent events have not prompted companies to ramp up investments; instead, they have reinforced a conservative mindset, focusing on managing price volatility rather than chasing short-term profits.
See More
Shell CEO Warns of Oil Supply/Demand Imbalance
- Global Oil Shortage: Shell CEO Wael Sawan warns of a current shortfall of 1 billion barrels of oil, a sentiment echoed by Halliburton CEO Jeffrey Miller, indicating that this shortage will exacerbate rising oil prices and impact global economic stability.
- Consensus Among Executives: CEOs from Chevron and ExxonMobil agree that it will take months to rectify the growing supply-demand imbalance, highlighting the profound effects of current geopolitical conflicts on the oil market, which necessitates cautious investor strategies.
- Dividend Performance Discrepancy: While Shell offers a dividend yield of 3.4%, Chevron and Exxon have a stronger track record of dividend growth at 3.9% and 2.8% respectively, making them more attractive for long-term investors seeking stability.
- Investment Strategy Recommendation: For long-term investors, Chevron is viewed as the most appealing option among integrated energy giants, particularly as oil prices are expected to decline, providing reliable dividend income and mitigating investment risks.
See More
Middle East Conflict Causes Global Oil Shortage
- Global Oil Shortage: The closure of the Strait of Hormuz due to the Middle East conflict has resulted in a shortage of 1 billion barrels of oil, with Shell CEO Wael Sawan and Halliburton CEO Jeffrey Miller sounding alarms about the ongoing supply/demand imbalance that is expected to last for months, impacting global energy market stability.
- Industry Response: CEOs of Chevron and ExxonMobil concur that it will take months to rectify the supply/demand imbalance once the conflict ends, indicating that the oil supply shortfall will worsen in the interim, potentially leading to increased volatility in oil prices.
- Investment Strategy: In the current high oil price environment, investors are advised to focus on integrated energy giants like Shell, Chevron, and Exxon, noting that while Shell cut its dividend in 2020, Chevron and Exxon have consistently increased theirs, demonstrating stronger financial stability.
- Dividend Yield Comparison: Currently, Chevron offers a dividend yield of 3.9%, Exxon at 2.8%, and Shell at 3.4%, making Chevron the most attractive option among integrated majors for long-term investors, especially as oil prices are expected to decline, providing reliable dividend income.
See More
Shell CEO Warns of Oil Supply/Demand Imbalance
- Global Oil Shortage: Shell CEO Wael Sawan warns that the world is currently short 1 billion barrels of oil, a sentiment echoed by Halliburton CEO Jeffrey Miller, indicating a growing supply crisis that threatens global energy market stability.
- Ongoing Conflict Impact: CEOs from Chevron and ExxonMobil agree that it will take months to rectify the supply/demand imbalance, suggesting that until the Middle East conflict is resolved, oil supply shortages will persist, potentially leading to increased price volatility.
- Dividend Performance Comparison: While Shell offers a 3.4% dividend yield, Chevron and Exxon have a stronger track record of dividend growth, with Chevron at 3.9% and Exxon at 2.8%, making them more attractive to investors, especially during periods of low oil prices.
- Investment Recommendations: Analysts suggest that given Chevron and Exxon's robust balance sheets and consistent dividend growth, long-term investors in the energy sector may prefer these companies over Shell, which faces greater investment risks.
See More
Buffett's New Investment: New York Times
- Investment Moves: Buffett's new position in the New York Times, valued at $351 million, indicates a strategic shift from tech stocks to traditional sectors, potentially altering the overall risk profile of his investment portfolio.
- Digital Subscription Growth: The New York Times added 450,000 digital subscribers in the last quarter, bringing the total to approximately 12.8 million, demonstrating significant progress in its digital transformation and potential for future revenue enhancement.
- Advertising Revenue Surprises: Digital advertising revenue surged to 25%, exceeding expectations of high teens, indicating strengthened competitiveness in the advertising market, which may support future profitability.
- Valuation Concerns: Despite generating $550 million in free cash flow, the New York Times' market cap is nearly $12 billion, resulting in a free cash flow yield of only 4.6%, raising concerns about its valuation and potentially limiting further stock price appreciation.
See More
Oil Stocks Surge Amid Ongoing Conflict in Iran
- Shareholder Return History: Chevron has returned over $5 billion in capital to shareholders over the last 16 quarters, with $3.5 billion allocated to dividends, demonstrating the company's ability to consistently reward investors even in volatile markets, thereby enhancing investor confidence.
- Low Break-even Point: Chevron maintains a break-even price of $50 per barrel for Brent crude oil, thanks to investments in high-quality assets and disciplined cost management, allowing it to generate higher free cash flow in the current environment where prices are nearing $100 per barrel.
- Optimistic Market Outlook: The U.S. Energy Information Administration projects oil prices could peak at $115 per barrel in the second quarter and not fall below $90 until the fourth quarter, providing a strong tailwind for Chevron's earnings and further solidifying its position in the energy market.
- Investment in High-margin Assets: Chevron focuses on high-margin assets such as the Permian Basin and the Gulf of Mexico, successfully integrating Hess to gain a 30% stake in the Stabroek Block, ensuring future growth potential and competitive strength in the market.
See More
Oil Majors Brace for Market Turbulence
- Supply-Demand Crisis: The near-total closure of the Strait of Hormuz since February 28 has led to a more than 13% reduction in global oil supply and about a fifth drop in LNG flows, pushing crude prices above $100 per barrel and forcing companies to seek alternative supplies, impacting long-term market stability.
- Cautious Investment Stance: Despite BP, Chevron, and Exxon Mobil exceeding first-quarter earnings expectations, none of the five major oil companies have raised spending plans for 2026 or beyond, reflecting a boardroom shift towards capital discipline and prioritizing shareholder returns over expansion.
- Price Volatility Risk: Brent crude prices have swung violently since the war began, peaking at $118 per barrel in March before slipping back to around $100, indicating heightened uncertainty over future prices, compelling companies to ensure profitability amid volatility.
- Future Investment Outlook: While spending is expected to rise between 2026 and 2030, recent events have not prompted companies to ramp up investments; instead, they have reinforced a conservative mindset, focusing on managing price volatility rather than chasing short-term profits.
See More
Shell CEO Warns of Oil Supply/Demand Imbalance
- Global Oil Shortage: Shell CEO Wael Sawan warns of a current shortfall of 1 billion barrels of oil, a sentiment echoed by Halliburton CEO Jeffrey Miller, indicating that this shortage will exacerbate rising oil prices and impact global economic stability.
- Consensus Among Executives: CEOs from Chevron and ExxonMobil agree that it will take months to rectify the growing supply-demand imbalance, highlighting the profound effects of current geopolitical conflicts on the oil market, which necessitates cautious investor strategies.
- Dividend Performance Discrepancy: While Shell offers a dividend yield of 3.4%, Chevron and Exxon have a stronger track record of dividend growth at 3.9% and 2.8% respectively, making them more attractive for long-term investors seeking stability.
- Investment Strategy Recommendation: For long-term investors, Chevron is viewed as the most appealing option among integrated energy giants, particularly as oil prices are expected to decline, providing reliable dividend income and mitigating investment risks.
See More
Middle East Conflict Causes Global Oil Shortage
- Global Oil Shortage: The closure of the Strait of Hormuz due to the Middle East conflict has resulted in a shortage of 1 billion barrels of oil, with Shell CEO Wael Sawan and Halliburton CEO Jeffrey Miller sounding alarms about the ongoing supply/demand imbalance that is expected to last for months, impacting global energy market stability.
- Industry Response: CEOs of Chevron and ExxonMobil concur that it will take months to rectify the supply/demand imbalance once the conflict ends, indicating that the oil supply shortfall will worsen in the interim, potentially leading to increased volatility in oil prices.
- Investment Strategy: In the current high oil price environment, investors are advised to focus on integrated energy giants like Shell, Chevron, and Exxon, noting that while Shell cut its dividend in 2020, Chevron and Exxon have consistently increased theirs, demonstrating stronger financial stability.
- Dividend Yield Comparison: Currently, Chevron offers a dividend yield of 3.9%, Exxon at 2.8%, and Shell at 3.4%, making Chevron the most attractive option among integrated majors for long-term investors, especially as oil prices are expected to decline, providing reliable dividend income.
See More
Shell CEO Warns of Oil Supply/Demand Imbalance
- Global Oil Shortage: Shell CEO Wael Sawan warns that the world is currently short 1 billion barrels of oil, a sentiment echoed by Halliburton CEO Jeffrey Miller, indicating a growing supply crisis that threatens global energy market stability.
- Ongoing Conflict Impact: CEOs from Chevron and ExxonMobil agree that it will take months to rectify the supply/demand imbalance, suggesting that until the Middle East conflict is resolved, oil supply shortages will persist, potentially leading to increased price volatility.
- Dividend Performance Comparison: While Shell offers a 3.4% dividend yield, Chevron and Exxon have a stronger track record of dividend growth, with Chevron at 3.9% and Exxon at 2.8%, making them more attractive to investors, especially during periods of low oil prices.
- Investment Recommendations: Analysts suggest that given Chevron and Exxon's robust balance sheets and consistent dividend growth, long-term investors in the energy sector may prefer these companies over Shell, which faces greater investment risks.
See More
Buffett's New Investment: New York Times
- Investment Moves: Buffett's new position in the New York Times, valued at $351 million, indicates a strategic shift from tech stocks to traditional sectors, potentially altering the overall risk profile of his investment portfolio.
- Digital Subscription Growth: The New York Times added 450,000 digital subscribers in the last quarter, bringing the total to approximately 12.8 million, demonstrating significant progress in its digital transformation and potential for future revenue enhancement.
- Advertising Revenue Surprises: Digital advertising revenue surged to 25%, exceeding expectations of high teens, indicating strengthened competitiveness in the advertising market, which may support future profitability.
- Valuation Concerns: Despite generating $550 million in free cash flow, the New York Times' market cap is nearly $12 billion, resulting in a free cash flow yield of only 4.6%, raising concerns about its valuation and potentially limiting further stock price appreciation.
See More
