US crude oil
On August 1, 2016, US crude oil (USO) (OIIL) (USL) (SCO) contracts for September delivery closed at $40.06 per barrel. That’s 3.7% below its previous closing price. It’s also 21.80% below its highest level for 2016 of $51.23 per barrel on June 8.
Lately, crude oil has been weak due to renewed . 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% in crude oil. Below are the correlations of these oil-weighted companies with West Texas Intermediate crude oil from July 1 to August 1, 2016. You can also see these in the above table.
Oil-weighted stocks that are correlated strongly with crude oil over the last month include the following:
- Oasis Petroleum (OAS) – 84.2%
- Continental Resources (CLR) – 83%
- RSP Permian (RSPP) – 81.8%
- Whiting Petroleum (WLL) – 79.5%
- Concho Resources (CXO) – 78.9%
- Denbury Resources (DNR) – 77.6%
- Murphy Oil (MUR) – 76.5%
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.