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Which Energy Stocks Could Be in Danger if Oil Keeps Stalling?

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Which Energy Stocks Could Be in Danger if Oil Keeps Stalling? PART 1 OF 5

Which Energy Stocks Could Be in Danger if Oil Keeps Stalling?

US crude oil

On November 13, 2017, US crude oil (USO) active futures were almost unchanged. On the same day, WTI crude oil futures settled at $56.76 per barrel.

Which Energy Stocks Could Be in Danger if Oil Keeps Stalling?

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OPEC (Organization of the Petroleum Exporting Countries) released its Monthly Oil Market Report on November 13, 2017. According to the report, OPEC crude oil production in October 2017 fell by 150.9 thousand barrels per day compared to the month before. This data was based on secondary sources. Most of the fall in oil production came from Iraq. However, Saudi Arabia’s oil output rose for the second consecutive month to ten million barrels per day last month. The rise in Saudi Arabia and US crude oil production may make traders skeptical about a further rise in oil.

In the past five trading sessions, US crude oil active futures fell 1%. During this period, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) fell 0.2% and 0.5%, respectively. Oil returns in the negative territory could be a concern for broader markets.

Oil-weighted stocks

Oil-weighted stocks that could fall with oil based on their trailing week correlations with oil are:

  • Whiting Petroleum (WLL): 98.8%
  • Occidental Petroleum (OXY): 94%
  • Murphy Oil (MUR): 88%
  • Hess Corporation (HES): 82.4%
  • Denbury Resources (DNR): 73%

WLL fell the most over this time period. We’ll focus on it in the next part. Oil-weighted stocks that may be least affected by oil’s movement based on the correlations in the trailing week are:

  • Continental Resources (CLR): 8.2%
  • SRC Energy (SRCI): -81%

In fact, CLR was the third-largest gainer among our list of oil-weighted stocks during this time period.

For our analysis, we have used oil-weighted stocks from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). We have further filtered stocks with production mixes of at least 60% in oil.

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