Occidental Petroleum (OXY) has outperformed Energy Transfer (ET) this year, with OXY’s stock rising 34% compared to ET’s 17%. The surge in Occidental’s stock can be attributed to the significant increase in WTI crude oil prices, which have jumped over 90% in 2023, largely due to geopolitical tensions affecting supply. As an upstream company, Oxy benefits directly from rising oil prices, allowing it to generate substantial profits as long as prices remain above its breakeven point of $60 per barrel.

In contrast, Energy Transfer, a midstream operator, has a more insulated business model, profiting from the transportation of oil and gas rather than direct sales. While higher oil prices indirectly boost its earnings through increased production, the benefits are less pronounced than for upstream firms like Oxy. Analysts forecast strong revenue and earnings growth for both companies through 2026, but OXY’s performance is more sensitive to commodity price fluctuations.

For investors, Oxy’s recent rally may not be sustainable if oil prices decline, suggesting that Energy Transfer could be a more stable long-term investment. Its higher yield and simpler investment structure may appeal to income-focused investors seeking less volatility.

Source: fool.com