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Oil Inventory Data: Which Oil-Weighted Stocks Could React?

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Crude oil

On December 27, 2017, US crude oil (USO) (DBO) February futures fell 0.6% and settled at $59.64 per barrel. That was $0.33 below their highest closing price in 2017. That same day, both the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 0.1%. These equity indexes may hold their gains because of higher oil prices.

The gap between US crude oil inventories and their five-year average defined by the inventories spread might share an inverse relationship with US crude oil prices. In the week ended December 15, 2017, the inventories spread was 10.7% compared to 11.9% the previous week. After the EIA (U.S. Energy Information Administration) reported inventory data on December 20, 2017, oil prices rose 2.7% to date. A contraction in the inventories spread could be behind the rise in oil.

In the week ended December 22, a rise up to ~1.2 MMbbls (million barrels) wouldn’t increase the inventories spread. On December 28, 2017, the EIA will release its crude oil inventory data for the week ended December 22, 2017. The market expects a fall of 3.9 MMbbls in US crude oil inventories for that week. So if the inventories spread further contracts, it may help oil prices rise.

Oil-weighted stocks

Below are the oil-weighted stocks that could catch the possible upside in oil prices after the inventory data is released, based on their trailing week’s correlations with oil prices:

  • SRC Energy (SRCI): 99.6%
  • Whiting Petroleum (WLL): 98%
  • California Resources (CRC): 92.3%
  • Oasis Petroleum (OAS): 80.9%
  • Kosmos Energy (KOS): 78.8%

Below are the oil-weighted stocks that may not move with oil prices based on the past four trading sessions’ correlations with oil prices:

  • RSP Permian (RSPP): 34.4%
  • Diamondback Energy (FANG): 30.7%

All these oil-weighted stocks have been gathered from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and have at least a 60% production mix in oil.

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