uploads///Correlation of Industrial Metals With Crude Oil

Analyzing the Correlation of Crude Oil and Industrial Metals


Nov. 20 2020, Updated 1:51 p.m. ET

Correlation analysis of crude oil and industrial metals 

In the past year, US crude oil was more correlated with iron ore compared to copper (JJC). The higher correlation might be attributed to the extensive use of iron ore in a crude oil–driven industry like transport compared to copper. During August 2015, the correlation between crude oil and iron ore touched 75.5%. The period witnessed China’s (FXI) economic turmoil and the devaluation of the yuan. Copper’s correlation with crude oil also spiked during August 2015. However, the degree of the correlation was lower compared to iron ore. So, the rise in the 30-day correlation in August 2015 could be attributed to China’s turmoil instead of the interaction of iron ore and copper with crude oil.

Article continues below advertisement

Since February 2016, when the recovery in crude oil started, iron ore’s correlation with crude oil spiked. However, industrial metals started to recover in January 2016 ahead of the crude oil recovery in February 2016. The recovery in industrial metals could be seen as an economic sentiment indicator. It could drive crude oil prices. Copper and iron ore are used extensively as industrial metals. If the prices soar, it shows an improving macroeconomic outlook. This could drive crude oil higher.

Upstream stocks

The above development could be important for US-based (QQQ) upstream stock such as Bonanza Creek Energy (BCEI), Clayton Williams Energy (CWEI), and Energy XXI (EXXI).


More From Market Realist

  • Open sign on a sidewalk
    Macroeconomic Analysis
    Top Reopening Stocks to Play the Shifting Market Sentiment
  • Morgan Stanley sign and stock numbers
    Macroeconomic Analysis
    Morgan Stanley's Buyback Stock Picks in 2021
  • Black Wall Street sign is sign of ethical investing
    Macroeconomic Analysis
    Ethical Investing Stocks and Funds for Your 2021 Portfolio
  • New York City skyline and Goldman Sachs logo
    Macroeconomic Analysis
    Goldman Sachs: Options Trade Picks to Play Earnings Season Volatility
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.