Which Oil Service Stocks Are Most Correlated To The Price Of Oil?

Oil & gas investors have been among the few groups who haven’t enjoyed the market rally in the first half of 2017. For investors looking to buy the dip in oil and for those looking to avoid further potential downside, Loop Capital has some valuable information about correlations between oil services stocks and WTI crude oil price.

Last Thursday, Loop released a new report that included the chart below of correlations between popular oil services stocks and WTI crude price since 1997.

“We believe that understanding historical correlations with crude oil can help cautious investors choose companies that are a bit more insulated from crude oil fluctuations and bullish investors pinpoint higher beta names,” Loop analyst Stephen Genargo wrote.

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Loop is projecting crude oil prices will rebound back to the $50-$57/bbl range by the end of 2017, but the firm isn’t necessarily most bullish on the highly-correlated stocks.

Instead, Genargo prefers oil services stocks with the most exposure to the U.S market. Loop names Halliburton Company HAL as its top large-cap stock pick and Oil States International, Inc. OIS, Newpark Resources Inc NR and Superior Energy Services, Inc. SPN as its top small- and mid-cap stocks.

While Loop maintains a Buy rating on all of the stocks mentioned above, Guggenheim analyst Michael LaMotte isn’t quite so bullish on the sector. Earlier this week, LaMotte downgraded the following oil services stocks from Buy to Neutral:

• Baker Hughes Incorporated BHI
• Fairmount Santrol Holdings Inc FMSA
• Helmerich & Payne, Inc. HP
• Nabors Industries Ltd. NBR
• Schlumberger Limited. SLB
• Halliburton
• Superior Energy Services

Guggenheim also cut its 2017 oil price forecast from $55 to $48/bbl.

Disclosure: The author is long HAL, SLB and BHI.