Oil Just Topped $109. Is It Too Late to Buy Chevron (CVX)? History Has a Clear Answer.

In absolute terms, the difference between a barrel of oil that costs $99 and a barrel of oil that costs $101 isn't much. But psychologically, that difference is immense.

At the end of the day on Tuesday, a barrel of benchmark Brent Crude oil cost $99.07, but early this morning, it was going for $101.02. Throughout the day, the price climbed higher, briefly topping $109. As of this writing, the per-barrel price of the global benchmark is over $108.

That's bad news for just about everybody... except shares of U.S. oil companies like Chevron (NYSE:CVX) and ExxonMobil (NYSE:XOM). But now that oil has broken through the $100/barrel threshold, is it too late to buy shares of Chevron?

Here's what history says is the answer.

Image source: Getty Images.

Oil price spikes have lifted Chevron's stock.

Because the war in Iran has been going on for so long, there's plenty of evidence that Chevron's stock is moving in tandem with Brent Crude oil prices.

Over the six and a half months of the conflict, the price of Brent Crude has bounced around wildly. It began the war at about $70/barrel, but soared to $109/barrel in early April, slipped to $90/barrel in late April, and peaked at a high of $114/barrel in early May.

After a ceasefire agreement was signed in June, the Brent Crude price fell back down to $72/barrel, but it steadily climbed again as the war dragged on through August, and is showing no signs of dropping again.

Both Chevron's and ExxonMobil's stock prices have mostly moved in tandem with the Brent Crude price. Their shares surged when Brent Crude prices rose in March, May, July, and August, and dropped when Brent Crude prices fell in April and June. The pattern has been crystal clear.

Image source: Getty Images.

Why the pattern should continue

The reason Chevron's share price has risen and fallen in tandem with Brent Crude prices during the war is that the vast majority of Chevron's production is located outside the Middle East.

Aside from a small amount of onshore production in the Partitioned Zone between Kuwait and Saudi Arabia, Chevron doesn't have any production operations in the Persian Gulf. Its main oil production operations are in the U.S., Kazakhstan, and Argentina, none of which are directly affected by the war in Iran.

This allows Chevron to benefit from higher global oil prices driven by Middle East supply disruptions while still producing plenty of oil to sell at those inflated prices.

Is it too late to invest?

Unfortunately for would-be Chevron investors, if the historical pattern holds, it is probably too late to squeeze much short-term gain out of the current situation by buying Chevron stock.

With Brent Crude prices already above $108/barrel, they're approaching the peak levels we saw in March and May. And after those short-lived peaks, Chevron's stock declined sharply, dropping 13% from its March high by mid-April, and 16% from its May high by early July.

Today, Chevron's stock is up 28.4% from that July low and trading at an all-time high.

Historically speaking, oil prices have rarely moved above $110/barrel. Even when they have, they've hardly ever stayed at that level for long. The longest sustained period in history during which Brent Crude prices remained above $110/barrel lasted only three months (Feb. through April of 2012).

In other words, for oil prices to go up from here and stay up for longer than three months would constitute a never-before-seen historical anomaly. But that's the only way Chevron's stock would go up significantly in the short term, if the historical patterns hold.

Historical anomalies do sometimes happen, but betting on them is a risky investment strategy. Instead, investors should expect Chevron's share price to decline along with oil prices in the near future. Exactly how soon it will happen, though, is anyone's guess.

John Bromels has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.