Prediction: If Oil Holds Above $100, Occidental Petroleum Stock Could Return 20% By Year-End

Occidental Petroleum (NYSE: OXY), the oil and gas giant more commonly known as Oxy, set a 52-week high of $67.45 per share on March 31. That year-to-date gain of nearly 60% was mainly fueled by the Middle East conflict's impact on global oil prices.

But after hitting a four-year high of $112.25 per barrel in May, WTI crude oil has dropped back to about $92 per barrel. Oxy's stock now trades at about $58. However, if oil climbs above $100 again and stays there, it could easily rise at least 20% by the end of 2026.

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Why is Oxy's stock pegged to oil prices?

Oxy is less diversified than vertically integrated energy giants like Chevron (NYSE: CVX), which owns a balanced mix of upstream, midstream, and downstream businesses. It generates most of its revenue from its upstream business, with a smaller share from its midstream business. It divested its downstream business, OxyChem, at the beginning of 2026.

Upstream exploration and extraction companies are generally more sensitive to oil prices than midstream infrastructure operators and downstream refineries and petrochemical producers. When oil prices are high, upstream companies can grow their revenue faster than their expenses. But when they drop below breakeven levels, their expenses grow faster than their revenue.

To maintain its current capex and dividends, Oxy needs oil to remain above its breakeven range of $40- $45 per barrel. Its free cash flow (FCF) also grows rapidly at above $60 per barrel. WTI crude oil hasn't traded below $45 per barrel since the worst days of the pandemic in 2020, so Oxy should remain safely above its breakeven levels for the foreseeable future.

What would $100 per barrel oil mean for Oxy?

Last month, the price of WTI crude dropped below $70 per barrel as the U.S. and Iran agreed to a ceasefire and peace talks. But since then, the conflict has resumed, and the Strait of Hormuz -- which handles about a quarter of all maritime oil trade -- remains closed.

As oil prices rise again, Oxy is integrating its assets from CrownRock (which it acquired in 2024) to shorten drilling times, cut structural costs, and boost free cash flow. It's also expanding its STRATOS direct air capture (DAC) plant and commercializing its carbon dioxide removal services for large companies.

Therefore, if oil rises above $100 again, Oxy's stock could easily rise about 20% to a new 52-week high of $70. Even at $70, Oxy would still be a bargain at 18 times next year's earnings -- so it could head even higher if elevated oil prices drive more investors back to its stock.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.