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Which Upstream Stocks Are Following the Oil Rally?

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May. 24 2016, Published 9:28 a.m. ET

Oil near 2016 high

On May 23, 2016, US crude oil (USO)(OIIL) closed at $48.08, just 0.47% below its 2016 high of $48.31 on May 17, 2016. Crude oil rose 0.69% on May 23, 2016, compared to the previous trading session. This series will analyze the correlation of oil-weighted stocks with crude oil and the correlation of natural-gas-weighted stocks with natural gas. It could help investors realign their portfolios based on quantitative data.

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Upstream stocks

Among upstream companies that are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and operate with a production mix of at least 60% of crude oil, Whiting Petroleum (WLL) had the highest positive correlation with WTI (West Texas Intermediate) crude oil over the last month between April 23 and May 23, 2016. It had a correlation of about 79.4% with US crude oil during this period.

Upstream stocks Carrizo Oil & Gas (CRZO), Bonanza Creek Energy (BCEI), Murphy Oil (MUR), and Clayton Williams Energy (CWEI) had correlations of 74.5%, 66.6%, 65.0%, and 61.2%, respectively, with US crude oil over the past month, as shown in the above table.

Continental Resources (CLR) and Halcon Resources (HK) had correlations of 31.8% and 29.3%, respectively, with WTI crude oil in the past month. Among XOP stocks that operate with production mixes of at least 60% crude oil, CLR and HK had the lowest one-month correlations with WTI crude oil.

Next, we’ll look at the return of these oil-weighted stocks compared to crude oil.

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