Have the share prices of major oil producers peaked for the year?

While most of the market has suffered this year, oil producer share prices have performed favourably, with ConocoPhillips, Occidental Petroleum, and Exxon Mobil reaping the benefits of increased demand and limited supply.

Shares in major oil producers, including ConocoPhillips [COP], Occidental Petroleum [OXY], and Exxon Mobil [XOM] have risen this year, buoyed by reduced oil supply and increasing prices following Russia’s invasion of Ukraine.

In a year in which the Dow fell 18.8% up to 4 October, ConocoPhillips’ shares have risen 58.4% and Exxon Mobil’s have increased 54.9%. Meanwhile, Occidental Petroleum’s share price more than doubled, with gains of 122% over the same period.

However, all three stocks have been trending downwards since 14 September, a month in which none have been able to match their previous high points for the year. With oil prices now starting to slip, could the oil bubble be about to burst?

Occidental Petroleum Buffetted

Occidental Petroleum’s share price peak for 2022 came on 29 August, when the stock closed at $75.26 having reached a high of $77.13 on the day.

Key to investor sentiment around this time was the news that legendary investor Warren Buffett was making moves towards a complete takeover of the business. Earlier in August, Buffett’s fund Berkshire Hathaway [BRK-A] had increased its stake in Occidental to above 20%, before receiving regulatory approval to acquire up to 50%.

However, despite Buffett’s activity, Bank of America analysts were bearish on the stock, saying “there are better options given [Occidental’s] limited upside.” BoA pointed to Buffett’s previous purchase of ConocoPhillips, which shortly preceded an oil price crash accompanying the 2008 financial crisis.

The Occidental Petroleum stock hit a seven-week low on 26 September, closing at $57.43, which apparently prompted Buffett to resume his purchase. Since 26 September, the stock recovered 10.7%, but with oil prices struggling amid fears of a global recession, many take the view that the history of Buffet’s ConocoPhillips investment — where the stock price plummeted in 2008 after Berkshire Hathaway acquired a 5.5% stake — is about to repeat itself.

ConocoPhillips insiders in sell-off

In the meantime, ConocoPhillips has struggled relative to Occidental this year. Its 2022 share price peak came on 8 June at $124.08. The closest it has come since was on 14 September, when it hit $117.71, but the stock has fallen off sharply since, dropping 16.1% to 27 September. Since then, however, the share price has recovered 12.9%.

The largest single-day drop in recent weeks came on 23 September, when the stock fell 8.6% in a single day. The slide coincided with a 4.8% drop in the price of Brent Crude, but ConocoPhillips seemed especially hard-hit compared to competitors, with Occidental slipping 5.1% and Exxon Mobil losing 5.3% on the same day.

Insiders have been selling shares in ConocoPhillips over the last 3–6 months, including director and advisor Timothy Leach, who sold $4.2m in shares at $102 each.

Its most recent earnings report came in 3.44% above analyst expectations, while Occidental’s came in 7.85% higher.

However, analysts are typically upbeat about ConocoPhillips. Piper Sandler analyst Ryan Todd recently raised his price target for the stock from $123 to $134, citing near-record distillate margins as part of the upside case for the stock.

Walkout closes Exxon Mobil refinery

Similarly to ConocoPhillips, investors need to look back to early June for Exxon Mobil’s high point this year, where the 8 June close of $103.58 marked a 74.6% increase year-to-date. With the exception of the last week of September, the stock has largely remained upward of $90 since June. However, as of Monday’s close, it once again seems to be rallying above $90.

Its most recent earnings report provided the biggest surprise of all three oil and gas companies, with an upside of 8.95%.

However, Exxon Mobil has been hit by strike action in France, which has led to the closure of its 235,000 barrel per day refinery, Fos-Sur-Mer. French unions CGT and Force Ouvriere have led walkouts over demands for higher pay in response to inflation. 

At the same time as upgrading his target for ConocoPhillips, Piper Sandler analyst Ryan Todd lowered his target for Exxon Mobil, from $109 to $108.

There was, however, some positive news for Exxon Mobil recently, with the announcement on 30 September that it has signed an agreement with Malaysian-based MISC Berhad [MISC.KL] for two liquefied natural gas carriers. The vessels are set for delivery in Q1 2023.