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Upstream Stocks: Why Oil’s Recovery Is Important

PART:
1 2 3 4 5
Part 4
Upstream Stocks: Why Oil’s Recovery Is Important PART 4 OF 5

Antero Resources: Why Its Stock Ignored Natural Gas

Gas-weighted stocks

Antero Resources (AR) had the highest correlation of 98.4% with crude oil active futures among gas-weighted stocks in the week ending July 17, 2017. On July 17, 2017, Antero Resources ignored a 1.3% gain in natural gas prices and closed ~0.3% lower. On the same day, US crude oil (USL) (DBO) August futures fell 1.1%.

Antero Resources: Why Its Stock Ignored Natural Gas

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Most importantly, Antero Resources had the second-lowest correlation with natural gas active futures in the week ending July 17, 2017, as we discussed in Part 3 of this series.

Other gas-weighted stocks that had the highest correlation with natural gas active futures are:

  • Rice Energy (RICE) – 64.3%
  • Chesapeake Energy (CHK) – 52.6%
  • Gulfport Energy (GPOR) – 49.1%
  • EQT (EQT) – 39.4%

Range Resources (RRC) and Southwestern Energy (SWN) had correlations of 9.4% and -2.3% with US crude oil active futures in the trailing week.

In fact, Range Resources and Southwestern Energy had the highest correlations with natural gas futures in the trailing week, as we discussed in Part 3 of this series. The correlation between natural gas and crude oil futures was -4.4% in the last five trading sessions.

Why is the correlation important?

The entire energy sector track oil closely. Crude oil prices also impact natural gas prices. Most of these gas-weighted stocks had higher correlations with crude oil compared to natural gas prices in the trailing week. However, over a long-term period, natural gas could be the most important catalyst for these gas-weighted stocks.

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

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