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Crude Oil Nears 2017 Lows: How It's Impacting the Energy Sector

PART:
1 2 3 4 5
Part 4
Crude Oil Nears 2017 Lows: How It's Impacting the Energy Sector PART 4 OF 5

How Natural-Gas-Weighted Stocks Correlate with Crude Oil

Natural-gas-weighted stocks and crude oil

Between June 19 and June 26, 2017, all gas-weighted stocks in the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) had higher correlations with crude oil than with natural gas except Chesapeake Energy (CHK). CHK had the highest correlation with natural gas active futures in the week ended June 26, 2017, which we discussed in part three of this series.

How Natural-Gas-Weighted Stocks Correlate with Crude Oil

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Gas-weighted stocks that had the highest positive correlation with US crude oil (USL) (DBO) futures between June 19 and June 26, 2017, are as follows:

  • Cabot Oil & Gas (COG): 94%
  • Antero Resources (AR): 92.1%
  • EQT (EQT): 86.6%
  • Rice Energy (RICE): 85.7%
  • Range Resources (RRC): 79.5%

While Chesapeake Energy (CHK) had a correlation of 72.6% with crude oil in the trailing week, WPX Energy (WPX) was the gas-weighted stock with the lowest correlation with crude oil at 33.9%.

A high correlation with crude oil active futures can be attributed to oil’s strong influence on the entire energy sector. Moreover, stronger oil prices also pose a threat to natural gas prices. But, in the long term, natural gas could be crucial for these gas-weighted stocks.

In the next part, we’ll discuss the returns of these gas-weighted stocks.

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