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Are Oil-Weighted Stocks Outperforming Crude Oil after OPEC Deal?

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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 60.0% crude oil (USL) (OIIL) (UWTI) (DWTI). They’re also part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

From November 28 to December 5, 2016, these stocks rose 15.8% compared to a 10.0% rise in WTI (West Texas Intermediate) crude oil futures contracts for January delivery during the same period.

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During that period, California Resources (CRC) rose 37.6%. Denbury Resources (DNR) and Whiting Petroleum (WLL) rose 29.2% and 27.1%, respectively. These three stocks outperformed their peers. California Resources and Whiting Petroleum are among the stocks that have the highest correlation with US crude oil. We looked at these correlations in the previous part of the series.

RSP Permian (RSPP), Occidental Petroleum (OXY), and Kosmos Energy (KOS) rose 9.9%, 3.8%, and 1.0%, respectively, during the same period. They underperformed their peers.

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 December 5, 2016, US crude oil active futures contracts rose 97.6% on a closing price basis. Our basket of equally weighted upstream stocks rose 123.6% during that 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 (DNR): 273.8%
  • Oasis Petroleum (OAS): 250.6%
  • Continental Resources (CLR): 206.1%

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

  • Hess (HES): 53.8%
  • Kosmos Energy (KOS): 27.4%
  • Occidental Petroleum (OXY): 10.6%

Crude oil–weighted stocks outperformed crude oil in the last five trading sessions and since the 2016 low for oil in February. In the next part of this series, we’ll see how much natural gas prices impact natural gas–weighted stocks.

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