Scan to Download ios&Android APP

Chevron (CVX) and Occidental (OXY) suffer after rating downgrade

19:12, 14 March 2022

Share this article

Have a confidential tip for our reporters?

A Chevron sign
Major US petroleum companies are seeing downgrades – Photo: Shutterstock

Morgan Stanley cut Chevron and Occidental stocks Monday, citing relative outperformance and valuation which sent prices downward during trading, but one analyst said oil will remain a strong investment.

Analyst Devin McDermott downgraded both stocks to ‘equal weight’ from ‘overweight’, saying in a client note the stocks’ spike last week was premature compared to the rest of energy shares.

“Alongside this rally, there has been a widespread relative performance across the group. As a result, we are re-evaluating some of our ratings and are downgrading Chevron (CVX) and Occidental Petroleum (OXY) from Overweight to Equal Weight. Both stocks have outperformed their peers and now offer less attractive relative valuations,” McDermott wrote in the note, viewed by

On Monday afternoon, both stocks were losing value. Chevron lost more than 3% during the day, to a low of $164.30 per share. Occidental Petroleum lost nearly 4.5% sinking to a low of $53.32 during afternoon trading. Overall, West Texas Intermediate slipped more than 6% to reach a low of $99.76 a barrel


The note adds that stocks leading the re-energised energy sector are looking “overstretched” and likely will pull back.

Occidental stocks “valuation discount versus peers that previously underpinned our constructive view has now closed,” McDermott wrote.

‘Strongest earnings’

The move was not unexpected for one analyst.

“The downgrade of Chevron and Occidental Petroleum did not surprise anyone as the recent outperformance and potential peak in energy prices suggests it can't get any better for these stocks,” said Edward Moya, senior market analyst for OANDA, told

Moya said energy stocks are still a solid trade as oil prices will likely remain elevated over the next couple of years. “Energy companies will deliver some of the strongest earnings going forward,” he said.

Overall pricing

In the past month, Chevron stock prices jumped 25%. However, earlier this month, JP Morgan downgraded Chevron to sell.

Occidental surged more than 40% after Warren Buffet’s Berkshire Hathaway endorsed the company by buying a large amount of its stock. Last week, Bank of America warned clients to reduce risk in the oil and natural gas sector, dropping Occidental to hold.

Morgan Stanley kept its price target on Chevron at $166 per share, while clipping Occidental’s price target by $2 to $50 per share.

The SPDR S&P exchange-traded fund (ETF) fund on oil and gas exploration and production EFT gained more than 13% within the past few weeks as oil prices and stocks hit elevated levels. Morgan Stanley continues to remain bullish on the exploration and production front, forecasting sector trades at about a 60% discount to market.

Morgan Stanley reaffirmed its faith in Canadian large-cap oil companies, the note reads, writing highly of buy-rated Canadian Natural, Cenovus, Imperial and Suncor.

Russia rubbish

Meanwhile, Fitch downgraded more than two dozen Russian natural resources companies including state gas giant Gazprom, and oil giant Lukoil warning of default risk on payments under sanctions imposed on the country for invading Ukraine.

The credit rating firm said it lowered the companies from 'B' to 'CC', explaining the latter score implies some form of default on their payments was "probable". A cut makes it harder for a company or country to borrow money at favourable interest rates.

The note, obtained by, cites the Kremlin’s 5 March decree authorising Russian companies to pay off debts to foreign companies via roubles instead of foreign currency.

The decree was in response to international sanctions slapped against Russia for its invasion of Ukraine, which sent the rouble into a freefall, according to the note, obtained by

The decree is, “against the backdrop of an escalating sanctions regime, could impose insurmountable barriers to many corporates' ability to make timely payments on foreign- and local-currency debt to certain international creditors,” Fitch’s note reads.

Gazprom and Lukoil were also downgraded by Moody’s last week. In total, three respected raters now classify Russia as at risk of defaulting on long-term sovereign debt after its invasion and subsequent sanctions. Lukoil has about 240 gas stations in the US, mostly operating in New York, New Jersey and Pennsylvania. They are owned by franchisees, not the oil giant.

“Ongoing ratcheting up of sanctions, including restrictions in energy trade and imports, increase the probability of a policy response by Russia, and further weaken its economy, eroding the operating environment for its corporates,” the note concludes.


Read more

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?

Join the 400.000+ traders worldwide that chose to trade with

1. Create & verify your account

2. Make your first deposit

3. You’re all set. Start trading