US crude oil futures
On July 31, 2017, US crude oil (USO) (DBO) (USL) September futures closed at $50.17 per barrel—0.9% above the last closing price. It’s the highest closing price for US crude oil active futures since May 25, 2017. Saudi Arabia’s plans to curb its oil exports have buoyed oil prices in the last few trading sessions.
In the seven calendar days to July 31, 2017, US crude oil September futures rose 8.3%. However, oil’s implied volatility also rose 6.2%. Usually, the two to move in opposite directions. During the same period, the S&P 500 Index (SPY) was flat, while the Dow Jones Industrial Average Index (DIA) rose 1.8%. Oil in the green could be an important catalyst for these equity indexes.
Oil’s rise could be an important factor for upstream oil-weighted stocks that operate with a minimum production mix of 60% in oil and constitute the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Let’s analyze the oil-weighted stocks that had the highest correlations with oil prices in the last five trading sessions.
- Diamondback Energy (FANG) – 93.5%
- SRC Energy (SRCI) – 89.9%
- Kosmos Energy (KOS) – 89.7%
- California Resources (CRC) – 86.6%
- RSP Permian (RSPP) – 86.3%
The oil-weighted stocks below had the lowest correlations with US crude oil futures.
On July 24–31, 2017, SRC Energy was the largest gainer, while Hess rose the least among the oil-weighted stocks in XOP. In the next part, we’ll discuss the returns in more detail.