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Chevron: Curious Rally


Chevron now trades at the highs in nearly a year.

The company still needs a substantial rally in oil prices in order to meet capital spending and dividend targets.

The rebound in the stock price far exceeds the slight rebound in the price of oil.

The latest rally in the energy firms is very curious. A stock like Chevron (NYSE:CVX) now trades at the highs going back for nearly a year while oil is only creeping above year-end lows.

At nearly $100, the stock trades as if the oil crisis hasn't really occurred. With oil still trading below prices where the energy giant needs to return to cash flow neutrality, is now the time to own, much less buy, Chevron?

Bearish Oil Thesis

The reasons to remain bearish on oil are plentiful, despite the sudden rally in the commodity. For its part, Chevron missed a great opportunity to again lower production back at the Analyst Day in early March. At the same time, the market has completely bought into the potential approval of production freezes by OPEC and Russia.

OPEC nations along with Russia and other non-OPEC members plan to meet in Doha over the weekend to complete the accord on freezing oil output at January levels. The freeze is at the highest levels of production for key countries like Saudi Arabia and Russia.

So despite freezing production at levels that the majority of the involved countries have no interest in increasing, Iran is a key cog in that plan. With...