Crude Oil’s Comeback: Analyzing Oil-Weighted Stocks
On August 15, 2016, US crude oil (USO) (OIIL) (USL) (SCO) contracts for September delivery closed at $45.74 per barrel—2.8% above its previous closing price.
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Nov. 20 2020, Updated 1:01 p.m. ET
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US crude oil
On August 15, 2016, US crude oil (USO) (OIIL) (USL) (SCO) contracts for September delivery closed at $45.74 per barrel—2.8% above its previous closing price. It’s also 10.7% below its highest level for 2016 of $51.23 per barrel on June 8.
Crude oil prices recovered on the hope that OPEC (Organization of the Petroleum Exporting Countries) will hold a meeting in September to discuss potential solutions to current low prices. Also, Saudi Arabia’s energy minister’s statement hinting at some action by OPEC to support prices and a bullish IEA report last week helped support prices.
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.
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% in crude oil. Below are the correlations of these oil-weighted companies with West Texas Intermediate crude oil from July 15 to August 15, 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:
- Oasis Petroleum (OAS) – 82%
- Carrizo Oil & Gas (CRZO) – 79.1%
- Kosmos Energy (KOS) – 77.8%
- Abraxas Petroleum (AXAS) – 76.8%
- Whiting Petroleum (WLL) – 75.6%
- Murphy Oil (MUR) – 74.9%
- RSP Permian (RSPP) – 73.8%
Oil-weighted stocks that had the lowest correlation with crude oil include the following:
- Vaalco Energy (EGY) – 17.6%
- Halcón Resources (HK) – 16.5%
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.