Simmons cautioned that although the market is signaling that Unocal is worth more than Chevron's initial offer, "Chevron has got to be very careful of not getting into a bidding war."
CNOOC's parent company, the Chinese National Offshore Oil Company, is predominantly owned by the Chinese government, giving it very deep pockets with which to make acquisitions.
Indeed, a considerable amount of the opposition to the deal comes from members of Congress who say CNOOC, as a government-backed company, is not on a level playing field with Chevron.
CNOOC chairman Fu Chengyu (傅成玉) denies that his company is acting on behalf of China's government, which is in the midst of a multibillion-dollar campaign to secure foreign oil and gas supplies to help fuel its booming economy.
"This company is driven purely by economics," Fu told reporters.
One concern in Washington is that CNOOC's bid for Unocal is part of a broader strategy by communist China to hoard energy supplies before they run out. Another is that the US might regret handing over technology or assets that have military value.
For example, Unocal has a stake in the Colonial Pipeline, which delivers fuel from the Gulf Coast to the Northeast, and it owns oil terminals that feed into the nation's Strategic Petroleum Reserve. There is also fear that certain deepwater drilling technology could have applicability in submarine warfare.
Many energy and national security experts have said much of the outcry from Congress has been overblown, and CNOOC executives have publicly said they are willing to shed assets and take other steps necessary to address national security concerns.
Nonetheless, on Thursday, the House registered its discomfort with the prospect of a state-owned Chinese company taking over an American oil firm, voting 398-15 to ask the president for an immediate and thorough review if Unocal accepts CNOOC's offer.
However, even if Unocal's leadership walks away from the proposed CNOOC deal, analysts said it's possible Chevron will sweeten its offer.
"If Chevron doesn't up the price," Simmons said, "then Unocal directors are going to get sued for turning down a better offer."
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