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Crude Oil Is near $40: Which Upstream Stocks Will Be Impacted?

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Dec. 4 2020, Updated 10:53 a.m. ET

Crude oil is near $40

US crude oil has been near $40 since March 28. On March 28, 2016, WTI (West Texas Intermediate) closed at $38.28. It was below the crucial technical support of $38.5. The price level of $38.5 is a retracement of crude oil futures from the high of $50.92 on October 9, 2015, and the low of $26.05 on February 11, 2016.

The production freeze talk seems to be totally discounted in the recent crude rally. WTI crude oil is trading 6% above its 100-day moving average and 9.3% above its 20-day moving average.

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Upstream stock highly correlated with crude

Abraxas Petroleum (AXAS) has the highest positive correlation with WTI crude oil among the upstream companies that are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) between February 11, 2016, and March 29, 2016. On February 11, WTI crude oil made multiyear lows and started to recover from this price level. During the same period, Abraxas Petroleum returned about 22.50%.

Other upstream stocks such as Cobalt International Energy (CIE), Matador Resources (MTDR), and Apache (APA) have a correlation of 61.4%, 57%, and 54% with WTI crude oil between February 11, 2016, and March 29,2016.

Production mix

  • Abraxas Petroleum operates with 65.9% production mix of crude oil.
  • Cobalt International Energy and Matador Resources operate with 75% and 49.3% production mixes of crude oil.
  • Apache operates with 53.1% production mix of crude oil.
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