uploads/2018/05/oil-pump-black-white-industry-2499156-2.jpg

Are Oil-Weighted Stocks Inversely Related to Oil Prices?

By

Updated

US crude oil

On May 9, US crude oil June futures rose 3% and closed at $71.14 per barrel—more than the three-year high. President Trump’s decision to withdraw from the Iran nuclear deal on May 8 pushed oil prices higher.

US crude oil inventories declined by 2.2 MMbbls (million barrels) for the week ending May 4—compared to the market’s expected fall of 0.2 MMbbls. The EIA reported the oil inventory levels on May 9.

Article continues below advertisement

Oil-weighted stocks

Among our list oil-weighted stocks, Denbury Resources (DNR) and Occidental Petroleum (OXY) had correlations of 65% and 39.2% with US crude oil June futures in the trailing week. The remaining oil-weighted stocks either had correlations below 20% or negative correlations with US crude oil June futures during this period.

The oil-weighted stocks that could move inversely to oil prices based on the trailing week correlations with US crude oil June futures were:

  • Carrizo Oil & Gas (CRZO) at -79.7%
  • WPX Energy (WPX) at -84.5%
  • Whiting Petroleum (WLL) at -98.6%

All of these oil-weighted stocks are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). They operate with a production mix of at least 60% in liquids based on their latest quarterly production data. Liquids include crude oil, condensates, and natural gas liquids.

Advertisement

More From Market Realist