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Energy Stocks: Key Quantitative Insights for Investors

PART:
1 2 3 4
Energy Stocks: Key Quantitative Insights for Investors PART 1 OF 4

Crude Oil Makes New 2016 Highs: Following Oil-Weighted Stocks

Crude oil is trending higher

On December 12, 2016, WTI (West Texas Intermediate) crude oil (UWTI) (USO) (OIIL) (USL) (SCO) (DWTI) January contracts closed at $52.83 per barrel. It was ~2.6% higher than the previous closing price and the highest level for 2016. Optimism around OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC producers agreeing to cut production fueled the bullish sentiment among traders. It helped oil prices continue their upturn.

Crude Oil Makes New 2016 Highs: Following Oil-Weighted Stocks

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.

Oil-weighted stocks

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 60.0% in crude oil.

Below are the correlations of these oil-weighted companies with WTI crude oil from November 12 to December 12, 2016.

  • Occidental Petroleum (OXY) – 77.5%
  • Concho Resources (CXO) – 77.2%
  • California Resources (CRC) – 77.2%
  • Kosmos Energy (KOS) – 75.1%
  • Hess (HES) – 74.5%
  • Denbury Resources (DNR) – 74.3%
  • Whiting Petroleum (WLL) – 74.1%

Oil-weighted stocks in XOP that had the lowest correlation with crude oil include the following:

  • Callon Petroleum (CPE) – 66.8%
  • Synergy Resources (SYRG) – 58.1%

If you’re bullish on crude oil, particularly after OPEC and non-OPEC producers’ crucial deal, you might be interested in some of the stocks that have a high correlation with crude oil to realign your portfolio.

In the next part of this series, we’ll look at the returns of crude oil–weighted stocks compared to crude oil.

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