Barclays sees multi-year oil boom, sees upside in OXY, devon and conocophillips
Investing.com -- Analysts at Barclays raised their medium-term oil price forecasts and upgraded Occidental Petroleum to Overweight, arguing that tightening global supply conditions and muted U.S. shale growth are setting up oil-focused energy companies for a prolonged cash flow boom.
In a sector note published Tuesday, Barclays said the market is underestimating how long elevated oil prices could last following disruptions tied to the Iran conflict and constrained Gulf production. The bank lifted its 2027 and 2028 WTI oil forecasts to $80 and $75 per barrel, respectively, while also increasing Brent projections.
Barclays said more than 14 million barrels per day of Gulf production remains shut in, according to IEA estimates, contributing to a severe drawdown in global inventories and a collapse in effective OPEC spare capacity. The bank expects oil balances to remain tight for at least the next two to three years, citing slow supply recovery timelines and limited responsiveness from U.S. shale producers.
The brokerage argued that oil-weighted exploration and production companies could generate free cash flow equivalent to more than 60% of enterprise value over the next five years under its updated price deck, while equity valuations still fail to reflect the improved earnings outlook.
Barclays upgraded Occidental Petroleum to Overweight from Equal Weight and raised its price target to $72 from $59. Analysts said the company’s deleveraging progress, improving capital efficiency and large low-cost resource base position it for stronger long-term shareholder returns. Barclays estimates OXY could generate enough free cash flow to reach its debt target and effectively prefund Berkshire Hathaway’s preferred stake obligations by the second half of 2027.
The bank also highlighted continued operational improvements in OXY’s Permian business, Gulf of America operations and enhanced oil recovery projects, which it believes are not fully reflected in current valuations.
At the same time, Barclays downgraded Expand Energy to Equal Weight from Overweight, citing weaker near-term natural gas fundamentals and slower realization of margin expansion initiatives. The bank lowered its Henry Hub gas forecasts for 2026 and 2027 to $3.70 and $3.50 per MMBtu, respectively, warning that new pipeline capacity and rising supply could keep storage levels elevated.
Among other top picks, Barclays said Devon Energy, California Resources Corporation and ConocoPhillips remain attractively valued relative to peers and historical trading multiples.