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Bank of America downgraded oil firm Chevron (CVX) Wednesday to neutral from buy, setting a target price of $90 per share for the stock. This downgrade comes a day after the company announced plans to "improve returns" and streamline the company's organization and portfolio. Among the actions in this undertaking is staff reductions that will take place through 2011, with 2,000 positions on the chopping block for this year. The downgrade comes after Tuesday's meetings, which prompted Bank of America to say that CVX "had little new to influence an investment case that has been reassuringly consistent in recent years." The brokerage recommended Exxon Mobil (XOM) as a "better value" over the near term.
Technically, I can't imagine recommending either of these stocks over the other. CVX faces long-term resistance in the $75 region and is battling its 20-month moving average. The story is very similar for XOM, as the stock is positioned below its 20-week and 10-month moving averages.
Of course, OPEC upped its global oil demand forecast by 100,000 to 900,000 barrels per day. Will OPEC's decision translate to success for oil companies? Perhaps, but both CVX and XOM are going to need a lot of help to break through their technical problems. Of course, the oil pits are a very volatile area, so any news could cause a sudden spike for either company.
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