Oil-Weighted Stocks Reacted to the Recent Jump in Oil



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 production mixes of at least 60.0% in crude oil (DBO) (USL). These stocks also make up part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

From March 27, 2017, to April 3, 2017, the basket of these stocks rose 8.1%—compared to a 5.3% rise in WTI (West Texas Intermediate) crude oil futures contracts for May 2017 delivery during the same period.

During this period, California Resources (CRC) rose 18.4%, Denbury Resources (DNR) rose 12.9%, and Kosmos Energy (KOS) rose 12.5%. These three stocks outperformed their peers and crude oil.

Hess Corporation (HES), Concho Resources (CXO), and Occidental Petroleum (OXY) rose 2.6%, 2.5%, and 1.4%, respectively, during the same period. These stocks underperformed their peers and crude oil.

Apart from their correlations with crude oil, the performances of these oil-weighted stocks could also be related to their earnings, the market’s expectation of their future prospects, and the broader market’s (SPY) (IVV) movements.

Performances of crude oil and oil-weighted stocks

On February 11, 2016, US crude oil touched a 12-year low. From February 11, 2016, to April 3, 2017, US crude oil active futures contracts rose 91.7% on a closing-price basis. Our basket of equally weighted upstream stocks rose 89.5% during the same period.

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

  • Oasis Petroleum (OAS) – 230.1%
  • California Resources (CRC) – 149.3%
  • Denbury Resources (DNR) – 145.6%

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

  • Carrizo Oil & Gas (CRZO) – 24.7%
  • Hess Corporation (HES) – 23.6%
  • Occidental Petroleum (OXY) – 1.7%

So, crude oil–weighted stocks have underperformed oil since February 11, 2016, but outperformed in the trailing week.

In the next part of this series, we’ll see how natural gas prices impact natural gas–weighted stocks.

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