Occidental's realized oil prices jump 38% as Iran war disrupts supply

Occidental Petroleum's second-quarter realized oil prices surged 38% as the US-Iran conflict disrupted crude flows through the Strait of Hormuz.

Occidental Petroleum's average realized oil price jumped 38% in the second quarter to $96.78 a barrel, the shale producer said Friday, as the US-Iran war disrupted supplies through the Strait of Hormuz.

"The conflict injected a hefty geopolitical risk premium into energy markets, with Brent averaging $96.68 in the quarter," the company said in its filing, noting the 23% jump in the benchmark from the first three months of the year.

The Houston-based producer's realized price nearly matched the benchmark at $96.78, up from $69.91 in Q1. Realized natural gas liquids prices rose nearly 30% to $24.64 a barrel, though natural gas averaged negative 80 cents per million cubic feet versus positive $1.20 in the prior quarter.

The surge shows how deeply the Iran conflict has reshaped oil markets. Brent briefly touched $126 a barrel in March after Iran shut the Strait of Hormuz, which normally handles about a fifth of global oil flows. While prices have since retreated to around $71 as the US and Iran signed a memorandum of understanding in June, the EIA projects global output won't return to pre-conflict levels until the end of 2026.

How the oil market weathered a historic shock

Brent crude fell 42% from its $126 wartime peak as optimism grew for a peace deal, according to Business Insider. West Texas Intermediate dropped 37% from its peak of around $109. The market absorbed the supply shock more readily over time as President Donald Trump repeatedly signaled an end to the conflict, a pattern traders dubbed the "TACO trade" — the idea that Trump Always Chickens Out and steps back to boost markets when needed.

Occidental, which carries about $18 billion in debt from its 2019 acquisition of Anadarko Petroleum, benefits directly from higher realized prices. The company's Q2 results will be closely watched for how much of the price uplift flows through to free cash flow and debt reduction. Berkshire Hathaway, which owns about a third of Occidental and holds preferred shares requiring hundreds of millions in annual dividends, is a key stakeholder in the outcome.

OPEC+ has already agreed to a production increase of 188,000 barrels a day starting in August, which may further stabilize the market. The EIA's forecast suggests additional supply could exert downward pressure on oil prices, though renewed fighting between the US and Iran in recent days has lifted crude to its biggest weekly gain in eight weeks, Reuters reported.

This article is for informational purposes only and does not constitute investment advice.