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Oil Fell: Oil-Weighted Stocks Could Be in Danger

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US crude oil

On November 20, 2017, US crude oil (USO) (DBO) active futures fell 0.5%. On the same day, US crude oil active futures settled at $56.42 per barrel.

OPEC (Organization of the Petroleum Exporting Countries) members will meet on November 30, 2017, to discuss the possible extension of the production cut deal beyond March 2018. However, US crude oil production has risen by ~0.7 MMbpd (million barrels per day) since OPEC implemented the production cut in January 2017. The rise in US crude oil production is ~58.3% of OPEC’s pledged production cut of 1.2 MMbpd. If the US oil rig count continues to rise, it could increase US crude oil production.

US crude oil exports are also up by 0.4 MMbpd in 2017 to date—compared to the same period last year. These factors could hinder oil’s upside.

In the seven calendar days to November 20, 2017, US crude oil active futures fell 1%. During this period, the S&P 500 Index (SPY) fell 0.1%, while the Dow Jones Industrial Average Index (DIA) was almost unchanged. Oil’s movement can influence broader markets.

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Oil-weighted stocks correlations

Oil-weighted stocks that could move in tandem with US crude oil active futures based on the correlations with oil prices in the past five trading days are:

  • Whiting Petroleum (WLL) – 96.1%
  • Carrizo Oil & Gas (CRZO) – 95.6%
  • Oasis Petroleum (OAS) – 93%
  • RSP Permian (RSPP) – 89.3%
  • Occidental Petroleum (OXY) – 88.4%

Whiting Petroleum fell the most during this period. Oil-weighted stocks that might be impacted less by oil’s moves, based on the trailing week correlations with oil prices, are:

  • Continental Resources (CLR) – 62.1%
  • Concho Resources (CXO) – 57.7%

Continental Resources and Concho Resources were among the oil-weighted stocks that fell the least in the trailing week.

Our list of oil-weighted stocks is from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). The criteria for selecting these oil-weighted stocks was based on their production mixes being at least 60% in oil.

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