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Oil-Weighted Stocks Outperformed US Crude Oil

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Dec. 4 2020, Updated 10:53 a.m. ET

Oil-weighted stocks

On August 21–28, 2017, oil-weighted stocks fell 0.1% on average. During this period, US crude oil October futures fell 2%. These oil-weighted stocks are from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). The stocks operate with a minimum production mix of 60% in oil.

Oil-weighted stocks that outperformed their peers in the trailing week were:

  • California Resources (CRC) at 9.5%
  • Kosmos Energy (KOS) at 4.4%
  • Continental Resources (CLR) at 1.8%

California Resources and Kosmos Energy had positive, but weak correlations with oil prices during this period. In fact, California Resources had the lowest correlation with oil prices among oil-weighted stocks in the seven calendar days to August 28, 2017.

Oil-weighted stocks such as Denbury Resources (DNR), Carrizo Oil & Gas (CRZO), and Murphy Oil (MUR) fell 8.3%, 7.1%, and 1.8%, respectively, in the trailing week and underperformed their peers. During this period, these three oil-weighted stocks had correlations of above 60% with oil prices.

Apart from the correlations with oil prices, fluctuations in the broader markets could also be important for these upstream stocks.

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Returns since last year

From February 11, 2016, and August 28, 2017, US crude oil active futures rose 77.7%. On February 11, 2016, US crude oil active futures fell to their 12-year low. However, the United States Oil Fund LP (USO), which tracks US crude oil active futures, rose 19.2% during this period. USO suffered a negative roll yield due to the shape of the futures forward curve.

Between these two dates, oil-weighted stocks rose 28.4%. So, oil-weighted stocks underperformed US crude oil active futures. Oil-weighted stocks that outperformed between these two dates were:

  • Continental Resources at 76.2%
  • Kosmos Energy at 71.1%
  • Oasis Petroleum (OAS) at 63.9%

Oil-weighted stocks that underperformed between these two dates are:

  • Denbury Resources at -6.5%
  • Whiting Petroleum (WLL) at -12.2%
  • Carrizo Oil & Gas at -45.8%
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