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Oil Fell: Which Oil-Weighted Stocks Are at Risk?

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Crude oil

On August 28, 2017, US crude oil (USO) (DBO) October futures closed at $46.57 per barrel—below the past ten-day trading range of $47–$50 per barrel on a closing price basis. On the same day, US crude oil futures fell 2.7%.

Hurricane Harvey is the main reason behind oil’s fall. Refinery outages in Houston due to the storm could increase crude oil stockpiles. On August 21–28, 2017, US crude oil October futures fell 2%. During this period, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 0.7% and 0.5%. Oil prices in the red could be an important catalyst for Wall Street.

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Oil-weighted stocks

Upstream oil-weighted stocks that had the highest correlations with US crude oil prices in the last five trading sessions are:

  • Callon Petroleum (CPE) – 90.4%
  • RSP Permian (RSPP) – 87.6%
  • Oasis Petroleum (OAS) – 82.5%
  • SRC Energy (SRCI) – 81.7%
  • Carrizo Oil & Gas (CRZO) – 79.8%

All of these oil-weighted stocks have closed in the red during this period. These oil-weighted stocks are from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). These upstream stocks operate with a minimum production mix of 60% in oil.

In the seven calendar days to August 28, 2017, California Resources (CRC) and Diamondback Energy (FANG) had the lowest correlations of 1.3% and 25% with oil prices. Both of these stocks closed in the green during this period. In fact, California Resources outperformed its peers in the trailing week.

In the next part, we’ll discuss these upstream stocks’ returns.

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