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Why Has Denbury Resources Been Underperforming Crude Oil?

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Denbury Resources underperforms crude oil

In the last month, crude oil producer Denbury Resources (DNR) has seen its stock price underperform crude oil (USO) and natural gas (UNG) prices. DNR has fallen ~6%, whereas crude oil and natural gas have fallen ~3% and 2%, respectively.

More than 95% of Denbury Resources’ production contains crude oil, so its stock price is more dependent on crude oil than on natural gas. DNR’s underperformance has been more evident in light of the marginally positive ~0.3% rise of the S&P 500 (SPY) in the last month.

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Reasons for weakness

The weakness in Denbury Resources in the last month can be attributed to industry weakness, as evidenced by the SPDR S&P Oil & Gas Exploration & Production ETF’s (XOP) fall of ~7%.

DNR’s peers Devon Energy (DVN), Occidental Petroleum (OXY), and ConocoPhillips (COP) have fallen ~4%, ~5%, and ~4%, respectively, in the last month. Almost all of the oil produced by Denbury Resources is produced using an EOR (enhanced oil recovery) technique. DVN, OXY, and COP all have presences in the EOR space.

Price action

After rising sharply from $2.22 to $4.29 from the start of November 2016 to mid-December 2016, DNR is currently consolidating its gains. DNR has been locked in the narrow trading range of $3.56–$3.99 for the last month. Its 50-day and 200-day moving averages stand at $3.37 and $3.47, respectively. Often, a stock’s 200-day moving average acts as a support level.

Next, let’s take a look at the possible trading range for DNR’s stock for this week based on its implied volatility.

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