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Oil-Weighted Stocks: How Are They Performing Compared to Crude Oil?



Oil-weighted stocks and crude oil in the last six trading sessions

Between May 16–23, 2016, an equally weighted basket of oil-weighted stocks that operate with a production mix of at least 60% in crude oil (USL) (BNO) and that are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) fell 7.2% compared to a 0.75% rise in WTI (West Texas Intermediate) crude oil during the same period. The returns in oil-weighted stocks are also adjusted for dividends.

During the same period, Clayton Williams Energy (CWEI) returned 12.5%. Carrizo Oil & Gas (CRZO) and Kosmos Energy (KOS) rose 2.8% and 2.0%, respectively. However, these three stocks outperformed their peers. Triangle Petroleum (TPLM), Abraxas Petroleum (AXAS), and Halcon Resources (HK) lost 26.6%, 26.38%, and 78%, respectively, over the same period. Triangle Petroleum, Abraxas Petroleum, and Halcon Resources fell the most among the peer companies here. Apart from crude oil’s impact that we discussed in the previous part, the relative performance of these oil-weighted stocks could be related to their earnings and analyst forecasts. Their earnings were reported in the last few weeks.

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Oil-weighted stocks and crude oil since 2016 lows

On February 11, 2016, US crude oil (USL) touched a 12-year low. Between February 11, 2016, and May 23, 2016, US crude oil gained 83.4%. The basket of these equally weighted upstream stocks gained 72.8% over this period. Denbury Resources (DNR), Bill Barrett (BBG), and California Resources (CRC) returned 287.4%, 158.5%, and 160.5% during this time. During the same period, Synergy Resources (SYRG) gained 5.5%. Vaalco Energy (EGY) and Triangle Petroleum (TPLM) lost 2.8% and 42.2%, respectively. These three stocks underperformed their peers between February 11 and May 23, 2016.

So, oil-weighted stocks have underperformed crude oil in the last six trading sessions, as well as since crude oil’s 2016 lows.


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