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US Crude Oil below $60 Might Harm Oil-Weighted Stocks

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Nov. 20 2020, Updated 10:59 a.m. ET

Oil prices

On November 14, US crude oil December futures rose 1% and closed at $56.25 per barrel. News of OPEC’s rescue plan might have helped US crude oil prices end the three-day losing streak.

In the last trading session, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) both fell 0.8%. On November 14, the Energy Select Sector SPDR ETF (XLE) fell 0.2%. The broader market’s fall might have been offset by rising oil prices.

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Oil steering oil-weighted stocks

Most of the oil-weighted stocks on our list had higher correlations with the US crude oil than the S&P 500 Index in the seven calendar days to November 14. With US crude oil prices moving below the psychologically important level of $60, the correlation of oil-weighted upstream stocks with oil prices rose significantly.

The following oil-weighted stocks could be sensitive to US crude oil movements based on their correlations with US crude oil December futures in the past five trading sessions:

  • Carrizo Oil & Gas (CRZO) at 91.4%
  • Whiting Petroleum (WLL) at 81.9%
  • Callon Petroleum (CPE) at 78.1%
  • Denbury Resources (DNR) at 72.2%
  • WPX Energy (WPX) at 69.3%

In the seven calendar days to November 14, oil-weighted stocks EOG Resources (EOG) and Concho Resources (CXO) had correlations of 28.8% and 15.4% with US crude oil prices, respectively—the lowest on our list of oil-weighted stocks.

In the trailing week, US crude oil December futures fell 8.8%. During this period, Carrizo Oil & Gas had the third-largest decline, while Denbury Resources had the fourth-largest decline.

All of these oil-weighted stocks are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). They operate with production mixes of at least 60.0% in liquids based on their latest quarterly production data. Liquids include crude oil, condensates, and natural gas liquids.

Next, we’ll discuss these oil-weighted stocks’ returns.

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