JP Morgan believes that oil stocks are currently overvalued by about $40. The bank primarily attributes this to the ongoing tension between the U.S. and Iran, which continues to drive up oil prices.
This week, first-quarter reports were released by three major oil companies. The market reacted differently to each. Some investors are betting on more stable businesses, others still believe in production growth, and some securities could drop significantly if oil starts to lose its geopolitical support.
May 2026 could be a turning point for these stocks. Right now, investors are essentially deciding which companies will weather a potential oil decline better than others.
Oil stocks in May 2026
ExxonMobil (NYSE: XOM)
ExxonMobil looks like the most resilient company on this list. Previously, the stock fell from $176.48 to $141.96 after tensions between the U.S. and Iran eased a bit, which also weakened oil prices.
Later, the quotes started rising again amid a new round of tension and the Project Freedom initiative. Currently, XOM is trading around $154.88 within an upward channel that has been forming since April 17. The channel is defined by two upward-trending lines.
But there is still no strong signal for continued growth. Until the stock consolidates above the upper boundary of the channel, the current movement is considered more of a correction within the trend.
From April 17 to May 5, the chart also shows a divergence in volumes. The price kept rising within the channel, while trading volumes gradually decreased during this period.
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Usually, falling volumes during a price increase indicate that buyers are not yet ready to actively support the upward movement.
ExxonMobil stock price analysis. Source: TradingView
ExxonMobil’s report was not as strong as it might appear at first glance. Yes, earnings beat market expectations at $1.16 per share. But the company started generating significantly less cash. For the quarter, cash flow dropped from $5.6 billion to $2.7 billion.
This is currently what concerns the market the most.
The key level for XOM now is $155.67. If the stock can consolidate above the upper boundary of the channel, it will open the way for further growth.
If XOM falls below $147.52, pressure on the stock may increase. In that case, the market will start looking at the levels of $142.48, $138.41, and $134.34.
Much will depend on the situation around the U.S. and Iran. For now, this conflict remains one of the main factors supporting oil prices.
Diamondback Energy (NASDAQ: FANG)
While XOM looks uncertain, FANG currently appears to be a riskier bet on oil sector growth. The chart now shows two bullish patterns forming back-to-back.
The first growth wave lasted from January 7 to March 27 and ended with an upward breakout on April 21. A new growth wave began forming as early as April 17. For now, the stock is just hovering around current levels. But if FANG breaks through $214.58, growth could accelerate significantly.
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The company’s report also supports this scenario. In the first-quarter 2026 report, Diamondback beat earnings-per-share expectations by 13% — the figure was $4.23. In addition, the company raised its oil production forecast to more than 520,000 barrels per day.
But there is also pressure from expenses. The company increased its capital expenditure forecast for all of 2026 from $3.75 billion to $3.9 billion.
Investors reacted to this without much enthusiasm, especially amid the risk of falling oil prices. After the report was published, FANG shares fell by 3.51% on May 6, dropping to $206.18.
Diamondback Energy stock price analysis. Source: TradingView
The chart currently shows two technical targets. Both point to roughly the same growth zone around $211–$214.
If FANG can consolidate above $214.58, the next growth targets will be $222.17 and $236.29.
But if it falls below the $203–$204 zone, the market will get a signal of a weakening trend. Losing the $192.43 level will open the way for a deeper correction, and a drop below $187.20 will completely break the current bullish formation.
May will be a test for FANG — will increased spending really deliver results?
A breakout above $214 will mean that investors believe in the company's strategy. And a drop below $187 will show that the market is increasingly skeptical about ramping up spending amid the risk of falling oil prices.
Occidental Petroleum (NYSE: OXY)
If XOM and FANG still look relatively confident against the backdrop of expensive oil, OXY could suffer more than the others if prices start to fall. JP Morgan believes that in 2026, Brent could average around $60 per barrel due to an oversupply in the market.
The first warning signs have already appeared in the latest Occidental Petroleum report. The company earned more than market expectations — earnings per share were $1.06 versus a forecast of $0.65. But free cash flow turned negative, totaling -$112 million.
It is especially important that this happened when the average realized oil price was $69.91 per barrel, meaning the geopolitical premium was still supporting the market. If oil really drops closer to $60, pressure on OXY cash flow could intensify.
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A bearish “head and shoulders” pattern has also been forming on the chart since February 27. The top of the pattern is around $67.48, the right shoulder is now forming around $60.79, and the neckline is roughly at $51.20.
If the price breaks this support downward, the downside potential could be about 22.75%, down to the $40.13 zone.
At the same time, the Project Freedom initiative and renewed tensions around Iran are still preventing a sharper decline in quotes.
The escort of commercial tankers through the Strait of Hormuz under the protection of the U.S. military shows that tensions between the U.S. and Iran persist. This is what is currently keeping oil from falling too low and supporting OXY revenues.
Occidental Petroleum shares are currently trading around $59.34.
Occidental Petroleum stock price analysis. Source: TradingView
If the stock can consolidate above $60.79, the next growth target will be around $67.48. Such a scenario would mean the market is once again pricing in heightened tensions around the Strait of Hormuz.
But if oil starts to weaken and OXY cannot hold current levels, the stock may retreat to $57.13. A break below $51.20 will confirm the completion of the bearish pattern and open the way for a drop to around $40.13.
For OXY , May 2026 could be a key moment. Right now, OXY is more dependent than the others on whether the geopolitical premium remains in oil.
Consolidation above $60.79 will keep the current formation intact. A drop below $51.20 will reinforce the scenario of further decline with a target around $40.13.
