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Saudi Arabia Cutting Oil Exports: Which Stocks Could Gain?

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US crude oil

On July 24, 2017, US crude oil (USO)(DBO)(USL) September futures rose 1.2% and closed at $46.34 per barrel.

Oil prices rose because Saudi Arabia said it would cut its oil exports to 6.6 million barrels per day in August 2017—a fall of 1 million barrels per day on a year-over-year basis.

OPEC and non-OPEC members reiterated their 1.8 million barrels per day production cut deal until March 2018 on July 24, 2017. Also, Nigeria agreed to limit its oil output at ~1.8 million barrels per day, whereas Libya plans to cap its oil output around 1.25 million barrels per day. But, in June 2017, Libya and Nigeria’s oil output were ~0.85 and 1.73 million barrels per day. So, we could see a rise in OPEC oil production in July 2017 on a month-over-month basis. In fact, Petro-Logistics forecasted a rise of 145,000 barrels per day in OPEC oil production in July 2017.

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Between July 17 and 24, 2017, US crude oil active futures rose just 0.2%. The Energy Select Sector SPDR ETF (XLE) fell 0.5% during this period. The S&P 500 Index (SPY) rose 0.4%, but the Dow Jones Industrial Average Index (DIA) fell 0.5% in the trailing week. Mixed oil prices could have contributed to the mixed sentiment in the broader markets as well.

Oil-weighted stocks

Our list of oil-weighted stocks is chosen from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). They all have a production mix of more than 60% oil.

Based on their correlation, the oil-weighted stocks that tracked oil closely in the last five trading sessions are:

  • Continental Resources (CLR)—89.3%
  • SRC Energy (SRCI)—80.2%
  • Hess (HES)—78%
  • Oasis Petroleum (OAS)—77.2%
  • California Resources Corporation (CRC)—71.7%

Oil-weighted stocks that had the lowest correlations with US crude oil active futures are:

  • Concho Resources (CXO)—33.1%
  • Denbury Resources (DNR)—27.4%

In the next part, we’ll discuss the price movement of these oil-weighted stocks.

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