Oil’s Falling: Stocks That Could Get Wet
US crude oil
On April 17, 2017, WTI (West Texas Intermediate) crude oil (USO) (OIIL) (USL) (DBO) May futures closed at $52.65 per barrel, which was ~1% lower than the previous closing price. Oil prices fell on worries of rising US oil production and subdued demand for crude oil.
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Crude oil is an important driver for global equities. In the trailing week, the Energy Select Sector SPDR ETF (XLE) fell 1.5%, while the S&P 500 Index (SPY) (VFINX) (SPX-INDEX) fell 1.1%. The S&P Mid Cap 400 Index (IVOO) (MID-INDEX) fell 0.6% during that period.
The Dow Jones Industrial Average Index (DIA) (DJIA-INDEX) fell 1% between April 10 and April 17. During the same period, the FTSE 100 Index (UKX-INDEX) (EWU) fell 0.3%, while the CAC 40 Index (PX1-INDEX) (EWQ) fell 0.7%.
In this series
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. But first, we’ll look at a few key upstream oil companies’ correlations with crude.
The companies below are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and operate with production mixes of at least 60.0% in crude oil. The following oil-weighted companies had the highest correlations with WTI crude from March 17, 2017, to April 17, 2017:
- Hess (HES): 54.4%
- Murphy Oil (MUR): 52.5%
- Whiting Petroleum (WLL): 50.9%
- Diamondback Energy (FANG): 49.7%
- SRC Energy (SRCI): 48.4%
The oil-weighted stocks in XOP that had the lowest correlations with crude oil during the period included the following:
In the next part of this series, we’ll compare the returns of crude oil-weighted stocks with that of crude oil.