Chevron stock price jumps as oil prices bounce back

Chevron stock price jumps as oil prices bounce back

  • Chevron stock price trades around 3% higher on higher oil market prices (the June contract)
  • Trump orders Chevron and other major oil companies to stop oil production activities in Venezuela
  • Traders ignore Trump's order as less than 2% of Chevron's total oil production is generated from Venezuela

Shares of Chevron (NYSE:CVX) have surged 3% today as oil prices continue a sharp rebound following a collapse on Monday and Tuesday. 

Fundamental analysis: Chevron stock jumps, ignores a row with Trump

Chevron stock price has surged higher despite an order from President Trump to halt oil production in Venezuela. In a bid to increase the pressure on Venezuela’s regime, President Trump signed an order yesterday instructing numerous oil companies, including Chevron, to “wind down” its operation in Venezuela by December 1.

“Paragraph (a) of this general license does not authorize:(1) The drilling, lifting, or processing of, purchase or sale of, or transport or shipping of any Venezuelan-origin petroleum or petroleum products,” it is noted in the order. 

Trump’s decision is likely to have a limited impact on Chevron’s earnings as less than 2% of total oil production is generated from Venezuela. 

The Treasury Department previously allowed Chevron to keep production activities alive in Venezuela, but has now decided to revert that decision. Although the order tells Chevron to wind down its oil production in the troubled country, it doesn’t necessarily ask Chevron to leave the country.

“The United States continues to strengthen its maximum pressure campaign against the illegitimate Maduro regime. This action will further deprive access to financial lifelines that Maduro relies on to sustain his tyrannical hold over Venezuela,”  a senior Trump administration official told CNN.

Chevron has historical ties with Venezuela, dating back to 1921. It is estimated that Chevron’s workforce in Venezuela numbers around 8,000 people as a part of five onshore and offshore production projects.

“We remain committed to the integrity of our joint venture assets, the safety and wellbeing of our employees and their families, and the company’s social and humanitarian programs during these challenging times,” Chevron spokesman Ray Fohr said in a statement.

Technical analysis: Stock price jumps on oil prices recovery

Oil prices (the June contract) are trading around 20% higher today, following a 19% jump yesterday. This rebound has helped shares of oil-focused companies, such as Chevron, to trade around 3% higher today. 

Chevron stock weekly chart (TradingView)

Chevron stock price printed a 14-year low in March amid the collapse in global demand for oil. However, the buyers have managed to recover around half of the earlier losses in the past few weeks. As long as shares of Chevron trade above $70, the base is set for a more meaningful recovery. 

The next target on the upside is $98, although any bigger move higher is highly dependent on the oil market prices. 

Summary

Shares of Chevron have jumped today as oil prices (the June contract) are on the way to register the second consecutive day with large gains. Chevron stock price ignored the order from Trump to stop oil production in Venezuela due to the limited impact on the company’s global business. 

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.

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