How Marathon Oil Is Responding to Low Energy Prices
Marathon’s year-over-year stock performance
In the final part of our series on Marathon Oil (MRO), we’ll be comparing the company’s stock movements to movements in the broader market, movements in crude oil and natural gas prices, and movement in the DXY (US dollar index).
As we saw in part one of this series, Marathon’s stock has fallen nearly 61% year-over-year. The stock was on a declining trend last year, mirroring crude oil and natural gas price movements. Recently, the stock has rallied, mirroring the rally in crude oil prices.
Many upstream companies such as Chesapeake Energy (CHK), Hess (HES), and Apache (APA) have taken a hit due to weak commodity prices. Year-over-year, their stocks have declined by 71%, 25%, and 20%, respectively. All these companies make up ~10% of the iShares U.S. Oil & Gas Exploration & Production ETF (IEO).
The correlation coefficient between Marathon’s stock price and crude oil prices (USO) from March 2015 to the present is ~0.6. This indicates a strong degree of correlation between crude oil prices and Marathon’s stock prices. In the same period, the correlation coefficient between MRO and natural gas prices (UNG) is 0.2. This also indicates a positive but substantially lower correlation between the two.
From the above graph, we can see that MRO stock has given lower returns compared to WTI’s and natural gas’s returns on a year-over-year basis.
When compared to the broader market S&P 500 ETF (SPY), MRO has underperformed SPY, which has returned -3% year-over-year. Also, as we can see in the graph, USDX has returned -1% since last year.
Browse this series on Market Realist: