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Which Oil-Weighted Stocks to Avoid amid Oil’s Decline?

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Oil-weighted stocks are sensitive to oil

The following oil-weighted stocks could be sensitive to oil’s price movements based on their correlations with US crude oil July futures on May 15–22:

  • California Resources (CRC): 97.4%
  • Hess (HES): 88.6%
  • Pioneer Natural Resources (PXD): 83.2%
  • Whiting Petroleum (WLL): 83.1%
  • Concho Resources (CXO): 82.4%
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Correlation and movements

In the trailing week, US crude oil July futures fell 1.3%. Whiting Petroleum fell the most among our list of oil-weighted stocks. Except for Pioneer Natural Resources, all of the stocks discussed above ended in the red. The magnitude of the correlation shows oil’s significance for these energy stocks. If US crude oil falls more due to the rise in US crude oil supplies and the risk premium evaporating, it might trouble investors in the stocks discussed above based on the correlations.

Apart from those oil-weighted stocks, Denbury Resources (DNR) and Callon Petroleum (CPE) had the second and third-largest falls. They had correlations of 61% and 46.4% with US crude oil prices. All of the oil-weighted stocks on our list had correlations of more than 36% with US crude oil futures.

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.

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