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Crude Oil’s Bumpy Ride: How Are Oil-Weighted Stocks Performing?

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Nov. 20 2020, Updated 3:42 p.m. ET

Oil-weighted stocks and crude oil

In this part of the series, we’ll look at the returns of an equally weighted basket of oil stocks that operate with a production mix of at least 60% crude oil (USL) (OIIL) (UWTI) (DWTI). They’re also part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

From October 17 to October 24, 2016, these stocks rose 1.2% compared to a 0.3% rise in West Texas Intermediate crude oil contracts for December delivery during the same period.

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During this period, Oasis Petroleum (OAS) rose 8.3%. Kosmos Energy (KOS) and Occidental PetroleumWhiting Petroleum (OXY) rose 4.4% and 3.5%, respectively. These three stocks outperformed their peers. Kosmos Energy had one of the highest correlations with US crude oil in the group in the past month. We discussed the correlations in the previous part.

On the other hand, Carrizo Oil & Gas (CRZO), Occidental PetroleumWhiting Petroleum (WLL), and California Resources (CRC) returned -0.9%, -2.4%, and -5.9%, respectively, during the same period. They underperformed their peers. The returns for these stocks are also adjusted for dividends.

In the previous part of this series, we saw how crude oil can impact some of these oil stocks. The performances of these oil-weighted stocks could also be related to their earnings and the market’s expectation for their future prospects.

Performance of oil-weighted stocks and crude oil since 2016 lows

On February 11, 2016, US crude oil touched a 12-year low. From February 11 to October 24, 2016, the US crude oil active futures contracts rose 92.2% on a closing price basis. Our basket of equally weighted upstream stocks rose 89.2% during this period. Below are the returns of some upstream companies during this period.

Stocks that outperformed their peers during this period include the following:

  • Continental Resources (CLR) – 177%
  • Denbury Resources (DNR) – 169.9%
  • Oasis Petroleum – 169.5%

Stocks that underperformed their peers during this period include the following:

  • Hess Corporation (HES) – 36.1%
  • Synergy Resources (SYRG) – 33.5%
  • Occidental Petroleum – 16.9%

So, crude oil–weighted stocks outperformed crude oil in the last five trading sessions, but underperformed it since oil’s 2016 low in February. In the next part of this series, we’ll see how strongly natural gas prices impact natural gas–weighted stocks.

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