What Rising Integrated Energy Stocks Could Mean for Your Portfolio

Integrated energy stocks performance in April

From April 3, 2017, to April 11, 2017, BP (BP) stock rose by 2.8%—the steepest rise among peers ExxonMobil (XOM), Chevron (CVX), and Royal Dutch Shell (RDS.A). XOM and CVX grew 0.9% and 1.1%, respectively in the same period, while Royal Dutch Shell (RDS.A) rose 2.6% in April.

By contrast, the broader market indicator, the SPDR S&P 500 ETF (SPY) fell 0.1% in April. SPY has ~7% exposure to energy sector stocks, including XOM and CVX. Now let’s look at what led to the rise in integrated energy stock prices.

What Rising Integrated Energy Stocks Could Mean for Your Portfolio

Usually, integrated energy stocks show high positive correlations to crude oil prices. Crude oil prices soared in April 2017 on account of the reduction in global supply and geopolitical issues.

The international scene

More specifically, oil prices rose due to Libya’s supply outage, political unrest in the Middle East due to Syria, and Russia’s likelihood to continue with production cuts. Crude oil prices have risen 6% in April. To know more, please refer to Market Realist’s “Russia, Libya, and Syria Impact Crude Oil Prices.”

Oil prices directly impact integrated energy companies’ upstream revenues. Thus, the higher the oil prices, the higher the upstream revenues for integrated energy companies. Rising oil prices presumably boosted integrated energy stocks’ prices in April.

Integrated energy stock: MA analysis

In April, as integrated energy stocks rose, they either crossed over their 50-day MAs (moving averages) or crossed over their 200-day MAs. ExxonMobil (XOM) and Royal Dutch Shell (RDS.A) have crossed over their 50-day MAs. RDS.A was trading above its 200-day moving average, but XOM was trading below it. Shell is now trading above both moving averages.

Contrarily, in April, Chevron (CVX) crossed over its 200-day moving average but traded below its 50-day MA. However, BP (BP) crossed over both its 50-day and 200-day MAs in April.

If you are looking for exposure to large US companies, you might consider the SPDR Dow Jones Industrial Average ETF (DIA). DIA also has ~6% of combined exposure to integrated energy majors XOM and CVX.

Series outline

In this series, we’ll look at the market performance indicators of integrated energy stocks in terms of their correlations with crude oil changes in April as well as in terms of short interest movements, implied volatility moves, beta status, institutional holding levels, analyst ratings, dividend yields, forward valuations assessment, and PEG ratios.

Let’s start with correlations to crude oil prices.