Oil-Weighted Stocks Could Be Influenced by Volatile Oil Prices


Nov. 20 2020, Updated 11:02 a.m. ET

US crude oil prices

On December 19, US crude oil February futures rose 3.4% from the lowest closing level in more than a year and closed at $48.17 per barrel. The market wasn’t expecting a decline of 0.5 million barrels in US crude oil inventories last week, but short-covering might have pushed oil prices higher.

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Oil-weighted stocks

The following oil-weighted stocks could be the most sensitive to US crude oil movements. They might be impacted the most by oil’s price movement based on their correlations with US crude oil February futures in the past five trading sessions:

  • Denbury Resources (DNR) at 89.6%
  • Concho Resources (CXO) at 87.7%
  • Whiting Petroleum (WLL) at 86.4%
  • WPX Energy (WPX) at 85%
  • California Resources (CRC) at 80.9%

The remaining oil-weighted stocks had at least a correlation of 38% with US crude oil prices in the trailing week except for Callon Petroleum (CPE) and Carrizo Oil & Gas (CRZO). They had correlations of 12.4% and 10.1% with US crude oil prices. LLS (Louisiana Light Sweet) crude oil versus WTI at Cushing, or the LLS-WTC spread, has fallen to $6.4 per barrel on December 19—the lowest since September 26. Carrizo Oil & Gas derives ~73.5% of its oil production from the Eagle Ford Shale region. LLS is the benchmark for most light sweet crude produced in the Eagle Ford region in Texas.

All of these oil-weighted stocks are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). They have 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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