Putin Favors Output Limit: Analyzing Crude Oil–Weighted Stocks
On October 10, 2016, WTI (West Texas Intermediate) crude oil (UWTI) (USO) (OIIL) (USL) (SCO) (DWTI) November contracts closed at $51.35 per barrel. The contracts were ~3.1% above the previous closing price. Oil prices gained due to Russian President Vladimir Putin’s comments in support of crude oil output limits.
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In this series, we’ll take a look at the correlations between crude oil–weighted stocks and crude oil. We’ll also look at the correlations between natural gas–weighted stocks and natural gas.
Let’s look at some of the upstream companies that are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and operate with a production mix of at least 60% in crude oil. Below are the correlations of these oil-weighted companies with WTI crude oil from October 3 to October 10, 2016. You can also see these in the above chart. Oil-weighted stocks that are correlated strongly with crude oil over the last month include:
- Oasis Petroleum (OAS) – 87.9%
- Whiting Petroleum (WLL) – 87.3%
- Carrizo Oil & Gas (CRZO) – 86.8%
- Continental Resources (CLR) – 86.5%
- RSP Permian (RSPP) – 84.5%
- Murphy Oil (MUR) – 84.3%
- Occidental Petroleum (OXY) – 83.8%
Oil-weighted stocks that had the lowest correlation with crude oil include the following:
Investors who are bullish on crude oil might use some of the stocks that have a high correlation with crude oil to realign their portfolios.
In the next part of this series, we’ll look at the returns of crude oil–weighted stocks compared to crude oil.