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The analyst believes that “XOM will be one of the key beneficiaries of a tight refined oil products market.”
“In recent years, the market has focussed more on energy transition capex than core businesses, an area where XOM appeared to be ‘lagging’ peers. With the world (and energy policy) now turned on its head, we believe XOM has two key advantages relative to peers 1) it is the largest refiner among the majors; and 2) it screens well on upstream portfolio longevity, an area we expect to be under increased scrutiny in a high commodity price environment,” Borkhataria said in a client note.
Borkhataria argues that the earnings momentum will continue fueled by refining tailwinds. On the other hand, Chevron (NYSE:CVX) shares are downgraded to Sector Perform from Outperform with a $165.00 per share price target (up from $160.00).
The analyst sees a more balanced risk-reward at current levels.
“CVX has rallied more than any other major in recent months, and we believe part of this has been a ‘safety trade’ alongside strong commodity prices… While we expect commodity prices to remain strong, we think the current valuation leaves less room for positive surprise, while headwinds with Tengizrealisations could weigh on earnings relative to peers,” Borkhataria added.
Chevron stock price is down 0.4% today.
By Senad Karaahmetovic
