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Have Oil-Weighted Stocks Outperformed Crude Oil?


Nov. 22 2016, Updated 10:22 a.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 November 14 to November 21, 2016, these stocks rose 9.6% compared to a 9.8% rise in West Texas Intermediate crude oil futures contracts for January delivery during the same period.

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During this period, California Resources (CRC) rose 26.7%. Continental Resources (CLR) and Whiting Petroleum (WLL) rose 14% and 12.8%, respectively. These three stocks outperformed their peers. Continental Resources and Whiting Petroleum are among the stocks that have the highest correlation with the US crude oil. We discussed the correlations in the previous part.

On the other hand, Synergy Resources (SYRG), Kosmos Energy (KOS), and Occidental Petroleum (OXY) returned 1.5%, 5.4%, and 5.7%, 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 November 21, 2016, US crude oil active futures contracts rose 65.3% on a closing price basis. Our basket of equally weighted upstream stocks rose 102.1% 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:

  • Denbury Resources – 211.2%
  • Oasis Petroleum (OAS) – 201.2%
  • Continental Resources – 184.3%

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

  • Hess Corporation (HES) – 38.7%
  • Kosmos Energy – 25.7%
  • Occidental Petroleum – 8.3%

So, crude oil–weighted stocks marginally underperformed crude oil in the last five trading sessions. However, the stocks outperformed 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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