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.
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:
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.