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Why Rise in Oil Could Be Necessary for Energy Stock Momentum

PART:
1 2 3 4 5
Why Rise in Oil Could Be Necessary for Energy Stock Momentum PART 1 OF 5

US Crude Oil Wavers Near $50: Which Oil-Weighted Stocks Are Following?

US crude oil

On October 2, 2017, US crude oil (USO) (DBO) (USL) November futures closed at $50.58 per barrel, 2.1% down from the last trading session. Between September 25 and October 2, 2017, US crude oil prices fell 3.1%. However, US crude oil prices were just 7.1% below their 2017 highest closing price. The possible limited short-term upside in US crude oil production and the revival of the US refinery utilization rate could be the bullish drivers for oil prices.

US Crude Oil Wavers Near $50: Which Oil-Weighted Stocks Are Following?

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In the trailing week, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 1.3% and 1.2%, respectively. Oil prices in the red could impact these equity indexes negatively.

Oil-weighted stocks

Oil-weighted stocks that could track US crude oil near the $50 mark based on their correlations in the trailing week are as follows:

  • Hess (HES): 95.8%
  • Whiting Petroleum (WLL): 93.2%
  • Continental Resources (CLR): 93.2%
  • Kosmos Energy (KOS): 92.9%
  • Oasis Petroleum (OAS): 91.3%

In fact, WLL and KOS underperformed their peers and closed in the red in the trailing week. We’ll discuss the returns of these oil-weighted stocks in part two of this series.

All these oil-weighted stocks operate with a minimum 60% production mix in oil. Moreover, these stocks are from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Oil-weighted stocks that had the least correlation with oil prices in the trailing week were:

  • Callon Petroleum Company (CPE): 85.3%
  • Denbury Resources (DNR): 83.4%
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