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Behind ExxonMobil's Integrated Value Chain: XOM in 3Q17

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Part 10
Behind ExxonMobil's Integrated Value Chain: XOM in 3Q17 PART 10 OF 17

Understanding How ExxonMobil Stock Relates to West Texas Intermediate Oil Prices

What’s correlation coefficient?

The correlation coefficient shows a relationship between two variables. A correlation coefficient between zero and 1.0 indicates a positive correlation, while 1.0 indicates perfect positive correlation, and between -1.0 and zero indicates a negative correlation. Here, we’ve considered the past three months and the past 15-day price history of XOM and WTI (West Texas Intermediate).

Understanding How ExxonMobil Stock Relates to West Texas Intermediate Oil Prices

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Correlation of ExxonMobil stock with WTI

The correlation coefficient of ExxonMobil with WTI stands at 0.48 for the past three months. The correlation value of ExxonMobil stock and oil prices show that the stock price of ExxonMobil has moved in line with WTI prices to a certain degree. This means that changes in oil prices can explain around 48% of the changes in ExxonMobil stock price over the past three months.

However, this figure has risen to 60% over the past 15 days, indicating a strengthening of correlation, which could be due to the impact of Hurricane Harvey. ExxonMobil, which has a robust upstream segment, will likely see the impact of pressurized oil prices in its next results, and its downstream facilities located on the US Gulf Coast have also been impacted.

Peer correlation analysis

The situation is the same for XOM peers BP and PBR, who have witnessed a rise in their correlations with WTI over the past 15 days. BP (BP) and Petrobras (PBR) have seen increases of 0.29 and 0.03, respectively, in the past 15 days compared with the past three months. BP and PBR’s current 15-day correlations with WTI stand at 0.75 and 0.62, respectively.

Chevron (CVX), Suncor Energy (SU), and Eni (E) have seen declines in their correlations with WTI, to 0.27, 0.32, and 0.38, respectively, over the past 15-day period.

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