Chevron (NYSE: CVX) stock price is likely to form bullish trend in the coming days following Yemen’s Iranian-aligned Houthi rebels drone attack on the heart of the Saudi oil industry.
The drone attack has erased almost half of Saudi oil production. This accounts for close to 5% of global production. The substantial decline in Saudi oil production is likely to offer a huge boost to oil prices.
Brent oil price soars sharply by 19% after attacks, making it the biggest intra-day jump since 1991. U.S. West Texas Intermediate (WTI) futures also increased as much as 15.5% to $63.34 a barrel on Monday, the biggest intra-day percentage gain since 1998.
The attack on the world’s largest processing facilities has erased oil output by 5.7 million barrels per day. Armco, on the other, has not provided a deadline for the resumption of oil output.
Companies like Chevron are likely to benefit from the steep increase in oil prices. It is well set to generate steady growth in production. The growth in oil prices would significantly add to Chevron’s third-quarter revenues, earnings and cash flows.
Its focus on high growth areas like Permian basin is likely to enhance its overall production potential at a high single-digit rate in the coming quarters.
In the latest quarter, its worldwide net oil-equivalent production stood around 3.08 million barrels per day. This represents an increase of 9% from a year-ago period.
Michael Wirth, Chevron’s chairman of the board and the chief executive officer said. “Net oil-equivalent production was the highest in the company’s history, driven by continued growth in the Permian Basin and at Wheatstone in Australia.”
The production growth is driven by shale and tight properties in the Permian Basin in Texas and New Mexico. Its unconventional production from the Permian Basin rose 50% year over year to 421,000 barrels per day in the second quarter.
Overall, the reduction in oil supplies from Saudi Arabia is expected to offer a huge boost to oil prices. Consequently, the higher prices would help Chevron stock price and financial numbers in the coming days.