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Oil or Equity: Which Could Influence Oil-Weighted Stocks More?

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May. 3 2018, Updated 10:40 a.m. ET

US crude oil

On May 2, US crude oil June futures rose 1% and closed at $67.93 per barrel, which limited US crude oil June futures’ trailing week decline to 0.2%.  On May 2, the International Monetary Fund issued a “declaration of censure” against Venezuela because it hasn’t provided essential economic and financial data. The declaration of censure might hamper the investments in the country and accelerate the fall in Venezuela’s oil supply.

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Inventory data

In the week ending April 27, US crude oil inventories rose by 6.2 MMbbls (million barrels)—compared to the market’s expected rise of 1 MMbbls. The U.S. Energy Information Administration reported the inventory data on May 2.

Oil-weighted stocks

The following oil-weighted stocks could be the most sensitive to any changes in oil prices based on the trailing week’s correlations with US crude oil June futures:

  • Carrizo Oil & Gas (CRZO) at 86.5%
  • Occidental Petroleum (OXY) at 84.4%
  • Oasis Petroleum (OAS) at 84.3%
  • Callon Petroleum (CPE) at 81.5%
  • California Resources (CRC) at 81.3%

On April 25–May 2, Whiting Petroleum (WLL) and Hess (HES) had negative correlations of 7.2% and 23.3%, respectively, with US crude oil June futures.

Correlation with equity markets

In the seven calendar days to May 2, all of these oil-weighted stocks had negative correlations with the S&P 500 Index (SPY). Denbury Resources (DNR) had the least negative correlation of 7.7%, while Oasis Petroleum had the most negative correlation of 73.8% with the S&P 500 Index during this period.

The oil-weighted stocks discussed 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.

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