Oil Stocks Poised to Soar as Crude Prices Remain Above $100

Oil prices have surged above $100 per barrel due to ongoing tensions in Iran. While this is bad news for consumers, it's a boon for big oil companies like Occidental Petroleum (OXY) and Chevron (CVX). These two stocks are well-positioned to benefit from higher oil prices.

Oxy generates most of its revenue and profits from upstream exploration, drilling, and extraction. This business benefits significantly from higher oil prices, which boost revenues at a faster rate than operating expenses. The company spun off its downstream business, OxyChem, earlier this year, making it an even more focused play on rising oil prices.

Analysts expect Oxy's adjusted EPS to surge 175% by 2026, with the stock currently trading at 16 times forward earnings. It also pays a forward yield of 1.9%, and has raised its dividend annually for five consecutive years. To support its capex and dividends, Oxy only needs WTI crude oil to remain above $40 per barrel.

Chevron, on the other hand, is one of the world's largest integrated energy giants, with upstream, midstream, and downstream businesses. While it's less operationally exposed to the Middle East conflict than most competitors, its heavier exposure to the downstream market makes it a less direct play on higher oil prices.

However, Chevron is a more balanced long-term investment due to its scale and diversification. It currently pays a forward yield of 3.4% and needs Brent crude to remain above $50 per barrel to cover its capex and dividends through 2030. Analysts expect Chevron's adjusted EPS to surge 122% by 2026, with the stock trading at 16 times forward earnings.