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Which Oil-Weighted Stocks Have Strong Correlations with Crude Oil?

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Nov. 20 2020, Updated 1:13 p.m. ET

US crude oil

On July 18, 2016, US crude oil (USO) (OIIL) (BNO) (SCO) September delivery contracts closed at $45.94 per barrel. That’s 1.5% below its previous closing price. That’s also 10.3% below its highest level for 2016 of $51.23 per barrel on June 8.

This could be attributed to the smaller-than-expected draw in US crude oil inventories and renewed supply glut concerns. In this series, we’ll take a close look at the correlations between crude-oil-weighted stocks and crude oil. We’ll also look at the correlations between natural-gas-weighted stocks and natural gas.

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Oil-weighted stocks

Let’s look at some of the 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% crude oil. Below are the correlations of these oil-weighted companies with WTI (West Texas Intermediate) crude oil from June 18 to July 18, 2016. You can also see these in the above table.

Oil-weighted stocks that have correlated strongly with crude oil over the last month include the following:

  • Oasis Petroleum (OAS): 89.0%
  • Bill Barrett (BBG): 86.8%
  • RSP Permian (RSPP): 84.9%
  • Continental Resources (CLR): 84.6%
  • Murphy Oil (MUR): 84.1%
  • Concho Resources (CXO): 78.9%
  • Synergy Resources (SYRG): 77.6%

Oil-weighted stocks that had the lowest correlation with crude oil include the following:

  • Vaalco Energy (EGY): 51.7%
  • Bonanza Creek Energy (BCEI): 51.6%

Investors who are bullish on crude oil might use some of the stocks that have a high correlation with crude oil to realign their portfolios.

In the next part of this series, we’ll look at the returns of crude-oil-weighted stocks compared to crude oil.

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