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).
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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%
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
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.