Oil prices are up sharply this year. Brent crude, the global oil price benchmark, has surged from $75 in early January to over $90 a barrel in recent days, a more than 15% rally. That has sent up most energy stocks, with the Energy Select SPDR ETF rising nearly as much as crude oil.

However, one notable laggard has been oil giant Chevron (CVX -3.04%), which is only up around 5% this year. It has significantly underperformed other energy stocks, including rival ExxonMobil (XOM -1.15%), which has rocketed nearly 20% this year.

That relative underperformance is why I recently bought more Chevron stock. Here's why I think it's one of the top oil stocks to buy these days.

Chevron doesn't need higher oil prices to thrive

The oil company has spent years building an advantaged resource portfolio that has low costs and earns high investment returns. Because of that, it can produce a lot of cash at lower oil prices.

The company has stress-tested its business for lower oil prices. It can produce enough cash flow to pay a growing dividend (it currently yields over 4%), fund its high-return capital program, and repurchase shares at the low end of its $10 billion-$20 billion annual range at an average oil price of $60 a barrel through 2027 (with crude falling to $50 in the 2025-2027 time frame). Its free cash flow would grow at a more than 10% annual rate under that scenario, fueled by its high-return capital program.

Chevron's ability to thrive at lower oil prices means it has tremendous upside to higher prices. For example, it can produce sufficient free cash flow to repurchase shares at the high end of its annual target range at an average oil price of $70 a barrel in the 2025-2027 time frame. That's enough to retire around 6% of its outstanding shares each year at the current pricing level.

Higher oil prices in the near term would enable Chevron to bank more cash to strengthen its already elite balance sheet. That would give it an even bigger future cushion, which it could use to repurchase shares during a meaningful price decline.

A big potential upside catalyst looms

One of the reasons Chevron has underperformed crude prices is concerns about its roughly $60 billion acquisition of Hess (HES -3.46%). The proposed deal would upgrade and diversify Chevron's already advantaged portfolio. It would enhance its existing position in the Gulf of Mexico, add a high-quality resource in the Bakken, and give it a stake in the world-class Stabroek block offshore Guyana.

The acquisition would enhance and extend Chevron's production and free-cash-flow growth outlook into the next decade. The company estimates that adding Hess would enable it to more than double its free cash flow by 2027, assuming oil averages $70 a barrel.

However, the acquisition hasn't gone as smoothly as planned. ExxonMobil, which operates the Stabroek block, is seeking to claim a right of first refusal to buy Hess' stake in the lucrative oil field. The oil giant and its other partner, Chinese oil company CNNOC, have filed for arbitration in the matter.

At best, the case will likely push the closing date into next year. Meanwhile, if Exxon wins, Chevron will likely walk away from the deal. While a termination would be a major disappointment, it wouldn't be the end of the world for Chevron, which can grow at a strong rate over the next several years without Hess.

The fuel to produce attractive total returns

Chevron's low-cost resource portfolio can produce lots of cash at much lower oil prices, which means it will deliver a much bigger gusher at current prices. However, the market isn't yet rewarding it for the potential, likely due to concerns about its needle-moving Hess deal, which adds to its upside catalyst.

The company has so much upside and limited downside, and I continue to add to my position. I believe it can produce solid total returns at lower prices with higher potential if crude remains strong and Chevron closes the Hess acquisition.