Tuesday, May 11, 2010

Occidental Petroleum (NYSE:OXY) Drops on Inflation, EU Fears

Occidental Petroleum (NYSE:OXY) fell, along with other energy and commodity companies, as increased inflation in China and major concerns over the fallout from the sovereign debt crisis in Europe, and whether or not the almost $1 trillion will do much to stop it, has investors wandering if demand can hold up under these economic circumstances.

With austerity measures tied to the sovereign debt bailout of some European countries, along with China battling inflation and attempting to ward off a potential bubble, thoughts are demand will start to decrease for raw materials, and adding Europe and China together could result in significant cutbacks, which could devastate countries and companies counting on Chinese demand to grow their economies.

One positive Occidental Petroleum does have in general, is they have no exposure in the Gulf of Mexico, which could have created many headaches and problems for them.

So while demand is a major issue going forward, at least they can focus primarily on economic issues and not legal ones, along with uncertainty about the future off deepwater, offshore oil drilling.

Occidental does have some offshore exposure, but that's in working with Libya and Qatar, but in the Americas it's all onshore drilling, which makes them a more predictable company than those with major offshore exposure at this time, especially those in the Gulf.

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