Investing

Correlation between Crude Oil Price and TSX Energy stocks

  • Last Updated:
  • Jul 2nd, 2017 10:21 am
[OP]
Newbie
Oct 11, 2013
11 posts
Toronto

Correlation between Crude Oil Price and TSX Energy stocks

Hello,

I have recently started investing in several TSX Oil stocks as crude oil was cheaper. Recently we have seen the crude oil price jump from $42 to $46. However, they are not reflected in price of my oil stocks as they have barely changed.

I am not an expert in this department, as I thought this was just good entry point. Can anyone help me to understand the concept?

Thanks
6 replies
Deal Addict
Jun 27, 2007
4383 posts
1182 upvotes
1. CAD at 75c
2. Commodities are traded (oil, gold), and resource companies are investment vehicles. In other words, if there is no confirmation via equities, oil price appreciation is just a bounce.
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Sr. Member
Feb 20, 2011
516 posts
94 upvotes
downtown TO
Don't invest in oil..huge mistake..been on a huge decline for years now
Member
Jun 28, 2016
284 posts
151 upvotes
Oil prices for today are up, but at the same time, oil prices projections for the second half of the year and 2018 have been getting slashed across the board. When you buy a company, you're buying into its future cash flows, so the more negative future picture being projected is weighing on the short-term increase in prices.

To put this in perspective, Goldman just slashed its 3 month forecast from $55 to $47.50. Now, that's still higher than the current price, but, as its previous earnings estimates were made assuming $55 oil, it will certainly lead to significant decreases in their earnings estimates for oil companies going into the next quarter. Similarly, JP Morgan recently slashed its 2018 forecast to $42/barrel (down from $53/barrel). If they're right (which is hardly assured) that would be a much bigger weight on company earnings than whether oil's at 43 or 46 today.
[OP]
Newbie
Oct 11, 2013
11 posts
Toronto
Thank you for your help everyone. I have a better understanding now.
Deal Expert
User avatar
Sep 19, 2004
22310 posts
4209 upvotes
Waterloo
In a BULL market/trend like 2016 = any good news is GREAT, bad news is meh

In a BEAR market/trend like 2017 = good news is meh, bad news is HORRIBLE and leads to TSX Energy tanking on any bad EIA report
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Deal Addict
User avatar
Nov 28, 2007
2738 posts
687 upvotes
Whitehorse, YT
As others have hinted, if investing in CAD you should do crude oil pricing in CAD to to see any correlation. Otherwise you are playing with two variables: crude prices and exchange rate forecasts.

Most oil producers hedge their production price so that in the short term they neither benefit nor lose from up and down movement in crude prices.

Some large energy stocks make their money from refining or transporting the black stuff.

Other energy stocks are mainly into gas rather than oil.

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