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How Correlations with Energy Commodities Impact Upstream Stocks

PART:
1 2 3 4 5
Part 2
How Correlations with Energy Commodities Impact Upstream Stocks PART 2 OF 5

Is Oil Outperforming Oil-Weighted Stocks?

Oil-weighted stocks

Between September 1 and September 11, 2017, our collection of oil-weighted stocks fell 2.9%, while the US crude oil October futures rose 1.6%. Our collection of oil-weighted stocks include upstream stocks from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) that have a minimum 60% production mix in crude oil.

Oil-weighted stocks that outperformed during this period follow:

  • Hess (HES): 3.7%
  • Occidental Petroleum (OXY): 2.4%
  • Concho Resources (CXO): 2.1%

Is Oil Outperforming Oil-Weighted Stocks?

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OXY and CXO were among the top five oil-weighted stocks that had the highest correlations with US crude oil prices in the last five trading sessions. We discussed that trend in Part 1 of this series.

Oil-weighted stocks that underperformed during this period follow:

  • Carrizo Oil & Gas (CRZO): fell 14.8%
  • Whiting Petroleum (WLL): fell 10.3%
  • RSP Permian (RSPP): fell 5.7%

CRZO had a negative correlation with US crude oil futures between September 1 and September 11, 2017, while RSPP had the least positive correlation during the first 11 days of the month.

Apart from the correlations with oil, these oil-weighted stocks could also track the broader market’s movements.

Long-term performance

Between February 11, 2016, and September 11, 2017, US crude oil October futures rose 83.4%. On February 11, 2016, US crude oil active futures closed at their 12-year low. During this period, the United States Oil Fund LP ETF (USO), which tracks US crude oil futures, rose just 22.9% due to a negative roll yield.

Our collection of oil-weighted stocks rose only 31.3% during this period. The oil-weighted stocks that outperformed during this period follow:

  • Continental Resources (CLR): rose 82.2%.
  • Kosmos Energy (KOS): rose 77.6%.
  • Oasis Petroleum (OAS): rose 67.1%.

The oil-weighted stocks that underperformed their peers between these two dates follow:

  • Carrizo Oil & Gas (CRZO): fell 49.4%.
  • Whiting Petroleum (WLL): fell 16.3%.
  • Occidental Petroleum (OXY): fell 1.2%.

In the next part, we’ll discuss the correlations of natural gas–weighted stocks with natural gas.

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