Middle East Conflict Fuels Oil Price Surge for Unaffected Producers

The ongoing conflict in the Middle East is creating an unexpected windfall for oil producers far from the battlefield. The Strait of Hormuz, a critical waterway that carries roughly one-fifth of global oil flows, has been severely constrained by disruptions since the US and Israel launched military operations against Iran on February 28.

This has led to higher crude prices, with some producers commanding outright premiums to Brent. Occidental Petroleum Corp., for instance, posted a worldwide realized oil price of $96.78 per barrel, up 38% quarter-over-quarter, driving adjusted EPS of $2.40 and free cash flow of roughly $3 billion.

ConocoPhillips realized $62.33 per barrel, up 36% year-over-year, despite its Qatar LNG facility being largely shut in during the quarter. CEO Ryan Lance has described the Strait bottleneck as 'not a resource problem, it's a connectivity problem.'

EOG Resources posted record adjusted EPS of $5.07 and $2.8 billion in free cash flow, with minimal direct war exposure aside from Bahrain. Diamondback Energy saw its realized oil price rise to $96.82 per barrel from $73.47 in the first quarter.