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Oil’s Fall: Which Energy Stocks Are at Maximum Risk?

PART:
1 2 3 4 5
Part 4
Oil’s Fall: Which Energy Stocks Are at Maximum Risk? PART 4 OF 5

Why Oil Is Important for Natural Gas–Weighted Stocks

Natural gas–weighted stocks

Between August 14 and August 21, 2017, WPX Energy (WPX) had the highest correlation of 90.3% with US crude oil active futures among the natural gas–weighted stocks. These upstream (or natural gas–weighted) stocks are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Why Oil Is Important for Natural Gas–Weighted Stocks

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Other natural gas–weighted stocks that had the highest correlations with natural gas prices in the trailing week follow:

  • Gulfport Energy (GPOR): 88.8%
  • Southwestern Energy (SWN): 67.0%
  • Range Resources (RRC): 63.0%
  • Chesapeake Energy (CHK): 56.5%

EQT Corp. (EQT), Rice Energy (RICE), and Cabot Oil & Gas (COG) had correlations of -42.1%, -61.6%, and -63.3%, respectively, with natural gas prices in the seven calendar days ended August 21, 2017.

This set of natural gas–weighted stocks had only positive correlations with natural gas during this period, which we discussed in Part 3 of this series.

Why oil is crucial

Crude oil (USL) could impact the entire energy sector as well as natural gas prices. In the short term, crude oil could impact these natural gas–weighted stocks.

Most of these natural gas–weighted stocks had a positive correlation with oil prices compared to natural gas in the trailing week. In the long term, natural gas could be vital for these upstream stocks.

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