Oil-weighted stocks and crude oil
Now, we’ll look at an equally weighted basket of oil-weighted stocks that operate with a production mix of at least 60% crude oil (USL) (BNO). They’re also part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). From June 6 to June 13, 2016, these stocks rose 2.0%—compared to a 1.6% fall in West Texas Intermediate crude oil during the same period. The returns of these oil-weighted stocks are adjusted for dividends.
On the other hand, Clayton Williams Energy (CWEI), Bonanza Creek Energy (BCEI), and Whiting Petroleum (WLL) fell 19.9%, 18.1%, and 15.7%, respectively, over the same period. They all underperformed their peers.
Apart from the impact of crude oil, which we looked at in the previous part, the performance of these oil-weighted stocks could be related to their earnings and the Market’s expectation for their future prospects.
Oil-weighted stocks and crude oil since their 2016 lows
On February 11, 2016, US crude oil (USL) touched a 12-year low. From February 11 to June 13, 2016, US crude oil rose 86.5%. The basket of these equally weighted upstream stocks rose 76.5% over this period. Below are the returns of these upstream companies during this period:
Stocks that outperformed their peers:
Stocks that underperformed their peers:
Oil-weighted stocks outperformed crude oil in the last six trading sessions. However, they underperformed crude oil since crude’s 2016 lows.
Next, we’ll see how natural gas impacted gas-weighted stocks.