Stumbling Oil Sector Drags OXY

The company is potentially selling its Middle East assets

Assistant Editor
Jun 9, 2020 at 1:12 PM
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The shares of Occidental Petroleum Corp (NYSE:OXY) are down 7.7% at $22.51 at last check, amid news that the oil and gas company is reviewing and possibly selling its Middle East assets in order to reduce debt. Meanwhile, BofA Global Research upgraded the stock to "buy" from "neutral," and hiked its price target to $32 from $18. Today's drop, however, seems to stem from strong dollar and oversupply concerns, which is affecting the broader U.S. oil and gas sector.

OXY has struggled to distance itself from its mid-March lows, trading sideways with overhead pressure at the $16 level keeping a lid on the shares. While the equity staged a breakout late last week, ending with a 60.5% week-to-date gain, overhead pressure at the descending 100-day moving average is keeping this rally in check. OXY remains down 45.6% year-to-date. 

OXY June 9

Analysts are bearish on OXY, with 18 of the 19 in coverage sporting a "hold" or worse rating, with a lone "strong buy" on the table. Meanwhile, the 12-month consensus price target of $13.38 is a 39.9% discount to current levels. 

Though calls outweigh puts in the options pits, these bearish bets are still more popular than usual. This is per OXY's 50-day put/call ratio of 0.74 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 85% of readings from the past year. 

A look at today's options trading shows an uptick in calls, with 83,000 across the tape so far -- double what is typically seen at this point -- compared to 38,000 puts. Most popular is the June 25 call, suggesting traders are speculating on more upside for the underlying stock by the time these contracts expire next Friday, June 19. 

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