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Rising Energy Commodity Prices: Where to Place Your Bets

PART:
1 2 3 4
Part 2
Rising Energy Commodity Prices: Where to Place Your Bets PART 2 OF 4

WTI Crude Oil Is above $50: How Are Energy Stocks Performing?

Oil-weighted stocks and crude oil

In this part of the series, we’ll look at the returns of an equally weighted basket of oil stocks that operate with a production mix of at least 60% crude oil (USL) (OIIL) (UWTI) (DWTI). They’re also part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

WTI Crude Oil Is above $50: How Are Energy Stocks Performing?

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From October 3 to October 10, 2016, these stocks rose 2.6%—compared to a 5.2% rise in West Texas Intermediate crude oil contracts for November delivery during the same period.

During this period, Oasis Petroleum (OAS) rose 13.6%. Kosmos Energy (KOS) and Occidental Petroleum (OXY) rose 7.8% and 6.8%, respectively. These three stocks outperformed their peers. Notably, Oasis Petroleum (OAS) has the highest correlation with US crude oil in the past month.

On the other hand, Carrizo Oil & Gas (CRZO), Whiting Petroleum (WLL), and California Resources (CRC) returned 4.2%, 5.6%, and -5.4%, respectively, over the same period. They underperformed their peers. The returns for these stocks are also adjusted for dividends.

In the previous part of this series, we saw how crude oil can impact some of these oil stocks. The performances of these oil-weighted stocks could also be related to their earnings and the market’s expectation for their future prospects.

Performance of oil-weighted stocks and crude oil since 2016 lows

On February 11, 2016, US crude oil touched a 12-year low. From February 11 to October 10, 2016, the US crude oil active futures contract rose 95.9% on a closing price basis. Our basket of equally weighted upstream stocks rose 98.7% during this period. Below are the returns of some upstream companies during this period.

Stocks that outperformed their peers during this period include the following:

  • Denbury Resources (DNR) – 208.7%
  • Continental Resources (CLR) – 188.6%
  • Callon Petroleum (CPE) – 172.3%

Stocks that underperformed their peers during this period include the following:

  • Hess Corporation (HES) – 40.6%
  • Synergy Resources (SYRG) – 31%
  • Occidental Petroleum (OXY) – 16.5%

Crude oil–weighted stocks have underperformed crude oil in the last five trading sessions, but outperformed since oil’s 2016 low in February. In the next part of this series, we’ll see how strongly natural gas prices impact natural gas–weighted stocks.

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