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Which Oil-Weighted Stocks Are Sensitive to Oil?

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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 29–June 5:

  • EOG Resources (EOG): 92.7%
  • Pioneer Natural Resources (PXD): 91.3%
  • Apache (APA): 89%
  • Callon Petroleum (CPE): 85.3%
  • Diamondback Energy (FANG): 83.9%

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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Correlation and movements

In the trailing week, US crude oil July futures fell 12.1%. Most of the five oil-weighted stocks discussed above ended in the red. The magnitude of the correlation shows oil’s significance for these energy stocks. More weakness in oil prices, due to the rise in US crude oil inventories, might trouble investors in these oil-weighted stocks based on the correlations.

On April 5, the EIA reported an increase of 6.8 MMbbls (million barrels) in US crude oil inventories. Analysts expected a fall of ~0.85 MMbbls in the inventories.

Except for ConocoPhillips (COP), all of the oil-weighted stocks had a correlation of at least 49% with US crude oil prices. ConocoPhillips had the least positive correlation of 32.4% with US crude oil prices. The company’s income sensitivity towards the Brent-WTI spread might explain the low correlation.

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