Morgan Stanley analysts see Brent crude oil prices hitting $100 in the second half of the year, and they name five global stocks that can benefit, including Occidental Petroleum (OXY).
Brent crude recently traded at $90.58, up 1%. It will hit $100 thanks to low inventories, low spare capacity and low investment, according to the analysts, led by chief commodities strategist Martijn Rats, CNBC reports.
As for the five stocks, in addition to higher oil prices, they can benefit from “bottom-up triggers” including volume growth, asset divestments and dividend increases, the analysts said.
The other four stocks are U.K. oil giant Shell (RYDAF) , Australian natural gas producer Santos SSLZY, China National Offshore Oil Corporation (CNOOC) and Russia’s gas titan Gazprom.
As for Occidental, it has “outsized leverage” on higher oil prices, the Morgan Stanley analysts said. It also has cut its risks immensely since it lost its investment-grade credit rating in 2020, they said. The company’s Low Carbon Ventures business provides a “potential pillar of long-term growth,” the analysts said.
Turning to Shell, its dividend “will likely rise far faster” than the company’s predicts, Morgan Stanley analysts said. And they predict it will buy back up to 6% of its shares outstanding.
The analysts also noted that the company’s valuation is low compared to its average for the past and compared to Shell’s competitors.
When it comes to Santos, its recent merger with Oil Search, which was the largest oil and gas company based in Papua New Guinea, gives the Australian company liquid natural gas projects in Australia, Papua New Guinea and Alaska, the analysts said.
