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Should Energy Investors Be Cautious with Oil-Weighted Stocks?

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Nov. 20 2020, Updated 11:08 a.m. ET

US crude oil

On March 7, US crude oil April futures fell 2.3% and closed at $61.15 per barrel.

On March 7, the EIA announced oil inventory and oil production data for the week ending March 2. US crude oil production rose by 86,000 barrels per day on a week-over-week basis to ~10.37 million barrels per day for the same week—a record high based on the EIA’s weekly data. However, US crude oil inventories for the week rose by 2.4 MMbbls (million barrels) versus the market’s expected rise of 2.6 MMbbls.

The weakness in the broader market could also have swayed oil returns in the last trading session. Sentiment in equity and oil markets are often interrelated. On March 7, the S&P 500 Index (SPY) closed down by roughly 1 point for the first time after three consecutive higher closes.

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Oil-weighted stocks

Below is a list of oil-weighted stocks that belong to the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) along with their correlations with US crude oil prices in the trailing week. These stocks may be most influenced by oil’s downward journey.

  • Hess (HES) at 92.8%
  • Occidental Petroleum Corporation (OXY) at 82.3%
  • Continental Resources (CLR) at 81.8%
  • Oasis Petroleum (OAS) at 76%
  • Callon Petroleum (CPE) at 75.1%

The oil-weighted stocks listed below from XOP may not be influenced by oil movements, based on their past five trading sessions’ correlations with US crude oil futures.

  • Kosmos Energy (KOS) at 1.1%
  • California Resources Corporation (CRC) at 0.6%

All these oil-weighted stocks have at least a 60% production mix in oil.

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