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Oil’s Flip-Flop: Which Oil-Weighted Stocks to Track?

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Nov. 20 2020, Updated 1:35 p.m. ET

US crude oil

On January 30, 2017, WTI (West Texas Intermediate) crude oil (USO) (OIIL) (USL) (SCO) March futures closed at $52.63 per barrel, which is ~1% lower than the previous closing price. US crude oil March futures fell 0.2% on a closing price basis in the week ending January 30, 2017.

Oil prices fell because of growing concerns about rising US crude oil production. The US oil rig count rose by 15 to 566 for the week ending on January 27, 2017. Rising rigs mean higher production, which could have a negative impact on crude oil prices. Last week, optimism around OPEC’s deal supported crude oil prices.

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In this series

In this series, we’ll take a 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

First, let’s look at the correlations for upstream companies that are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and operate with production mixes of at least 60.0% in crude oil.

Below are the correlations of the top five oil-weighted companies that have the highest correlation with WTI crude oil from December 30, 2016, to January 30, 2017.

  • Carrizo Oil & Gas (CRZO) – 65.7%
  • RSP Permian (RSPP) – 50.9%
  • Callon Petroleum (CPE) – 48.5%
  • Continental Resources (CLR) – 42.8%
  • California Resources (CRC) – 41.4%

Oil-weighted stocks in XOP that had the lowest correlations with crude oil during this period were:

  • Hess (HES) – 0.3%
  • Kosmos Energy (KOS) at -34.9%

If you’re bearish on crude oil, particularly due to rising US oil production, you might want to take a look at stocks that have low correlations with crude oil in order to realign your portfolio.

In the next part of this series, we’ll look at the returns of crude oil–weighted stocks compared to crude oil.

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