Oil’s Fall: Which Oil-Weighted Stocks Could Be at Risk?

US crude oil active futures

On July 10, 2017, US crude oil (USO) (DBO) August futures settled at $44.40 per barrel, which is only 0.40% above the previous day’s closing price. Technical buying could be behind the small gain in oil prices that day. But in the five trading sessions to July 10, 2017, US crude oil August futures fell 5.7%. The rise in US crude oil production and oil rig count contributed to the fall in oil prices.

Oil’s Fall: Which Oil-Weighted Stocks Could Be at Risk?

Between July 3 and July 10, 2017, the Energy Select Sector SPDR ETF (XLE) fell 2.9%. US equity indexes, including the S&P 500 Index (SPY) and the Dow Jones Industrial Average (DIA), fell 0.10% and 0.30%, respectively, during that time period. Energy accounts for some part of these equity indexes.

Correlations of oil-weighted stocks

Among the oil-weighted stocks that operate with a production mix of 60.0% or more in crude oil and are constituents of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), Concho Resources (CXO) had the highest correlation of 85.3% with US crude oil active futures between July 3 and July 10, 2017.

Other oil-weighted stocks that had the highest correlations with US crude oil active futures in the week ended July 10, 2017, are follows:

  • Hess (HES): 84.1%
  • SRC Energy (SRCI): 82.4%
  • Whiting Petroleum (WLL): 78.3%
  • Continental Resources (CLR): 67.1%

California Resources (CRC) and Kosmos Energy (KOS) are the two oil-weighted stocks that had the least correlation with US crude oil active futures between July 3 and July 10, 2017. Their correlations were 12.3% and -38.0%, respectively, with crude oil during that period.

More importantly, all oil-weighted stocks in XOP closed in the red in the week ended July 10, 2017. Next, we’ll take a look at those oil-weighted stocks.