Stock Price Forecast: XOM, CVX, RDS.A, and BP until December 31

Maitali Ramkumar - Author

Nov. 19 2018, Updated 1:15 p.m. ET

Implied volatilities in integrated energy stocks

The implied volatilities in integrated energy stocks have risen in the fourth quarter. BP’s (BP) implied volatility has risen the most compared to ExxonMobil (XOM), Chevron (CVX), and Royal Dutch Shell (RDS.A).

The implied volatilities in BP and Shell rose by 7.8 percentage points and 5.3 percentage points, respectively, on October 1 to the current levels of 25.7% and 22.6%, respectively. The changes in the implied volatilities are lower in the other two stocks. The implied volatilities in ExxonMobil and Chevron rose by 4.5 percentage points and 5.0 percentage points, respectively, during the same period. The implied volatilities in ExxonMobil and Chevron are 20.0% and 23.1%, respectively. BP’s implied volatility is the highest compared to Shell, ExxonMobil, and Chevron, considering the absolute implied volatility levels.

If we consider the stock prices in the stated period, then BP stock has fallen 12.7%—the highest among its peers. Shell, ExxonMobil, and Chevron have decreased 10.5%, 8.0%, and 4.3%, respectively, since October 1.

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Price range forecast

Considering integrated energy stocks’ current implied volatilities and assuming a normal distribution of prices (bell curve model) and standard deviation of one (with a probability of 68.2%), integrated energy stocks’ price could end within the upper and lower price limits in the fourth quarter ending on December 31.

In the above chart, you can see that BP stock, which has the highest implied volatility, could have the largest percentage gain or loss by the end of the fourth quarter. BP could close between $44.5 and $37.2 per share. In contrast, ExxonMobil could have the smallest gain or loss. ExxonMobil could close between $84.5 and $73.4 per share. Chevron could close between $128.7 per share and $109.4 per share. Shell could close between $67.0 per share and $57.1 per share.

Next, we’ll discuss integrate energy stocks’ dividend yields.


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