Is Occidental Petroleum Still a Buy Now that WTI's Down to $70 a Barrel?

Occidental Petroleum remains highly sensitive to WTI crude, which fell from a four-year high of $112.25 per barrel in mid-May to around $70, while Oxy stock pulled back from a 52-week high of $67.45 to about $50. The article says Oxy needs oil above $40-$45 per barrel to support capex and dividends, and that free cash flow improves above $60 per barrel. Despite a roughly 10x forward earnings multiple and progress reducing Anadarko-related debt, the piece favors more diversified peers ExxonMobil and Chevron in the current choppy market.

Analysis

OXY is the cleanest way to express a directional oil view, but that also makes it the most fragile in a range-bound crude market. The key second-order effect is not just margin compression on lower WTI; it is valuation de-rating as investors stop paying for “oil beta with optionality” and instead re-rate OXY toward a more levered upstream cash-flow stream with less diversification than the majors. That argues for continued relative underperformance versus CVX/XOM unless crude re-accelerates quickly.

The more important setup is balance-sheet sensitivity. OXY has made progress de-risking post-Anadarko, but its capital return capacity still depends on oil staying comfortably above the low-$40s; if WTI spends months in the $50s-$60s, the market will start treating buybacks and dividend growth as cyclical rather than durable. That matters because the stock has already moved from scarcity pricing to a more skeptical multiple regime, so any downward revision to near-term EPS/FCF estimates can compress the forward P/E even if cash generation remains positive.

Contrarianly, the market may be underestimating how little room there is for a true balance-sheet stress event absent a recession. A lot of the bearishness assumes crude must revisit pandemic-era lows for OXY to matter less; in practice, the stock can still work as a cash-flow engine above the mid-$40s, but the upside is capped unless oil re-enters the $80s. In this tape, the better expression is relative value: prefer the diversified majors for downside protection, and use OXY only as a tactical beta trade with explicit commodity risk controls.

Key Decisions for Investors

• Underweight OXY vs long CVX in a 1-3 month pair trade: the spread should widen if WTI stays in the $60s, with CVX offering better earnings durability and lower multiple risk.
• Sell OXY upside against a long core position via covered calls over the next 30-60 days; implied vol should remain supported, and capped upside is acceptable while crude lacks directional momentum.
• If oil breaks back above $75/bbl on a geopolitical or supply shock, rotate from CVX into OXY for 4-8 weeks to capture higher torque to spot prices; otherwise maintain the relative-value short OXY stance.
• For hedged portfolios, use OXY as the short leg against a broader energy long basket if the goal is to isolate crude-beta rather than company-specific resilience.
• Avoid adding to OXY ahead of earnings unless near-term WTI trends higher for at least 2-3 weeks; the stock is likely to trade on guidance revisions more than trailing cash flow.