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How Correlations with Energy Commodities Impact Upstream Stocks

PART:
1 2 3 4 5
Part 5
How Correlations with Energy Commodities Impact Upstream Stocks PART 5 OF 5

Are Gas-Weighted Stocks Tracking the Fall in Natural Gas Prices?

Natural gas–weighted stocks

Between September 1 and September 11, 2017, our collection of natural gas–weighted stocks fell 3.1%, while natural gas October futures fell 3.9%. Our collection of natural gas–weighted stocks include upstream stocks from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) that have a minimum 60% production mix in natural gas.

The natural gas–weighted stocks that fell the least during this period follow:

  • Rice Energy (RICE): -1.2%
  • Antero Resources (AR): -1.4%
  • WPX Energy (WPX): -2.2%

Are Gas-Weighted Stocks Tracking the Fall in Natural Gas Prices?

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These three natural gas–weighted stocks had higher correlations with US crude oil prices compared to natural gas. We discussed this topic in Part 3 and Part 4 of this series. In the past five trading sessions, US crude oil October futures rose 1.6%.

The natural gas–weighted stocks that fell the most during this period follow:

  • Range Resources (RRC): fell 4.9%
  • Southwestern Energy (SWN): fell 4.8%
  • Gulfport Energy (GPOR): fell 3.9%

SWN and GPOR had the highest correlations with natural gas futures between September 1 and September 11, 2017. We highlighted this trend in Part 3 of this series.

Apart from the correlations with oil and natural gas, these natural gas–weighted stocks could also track the broader market’s movements.

Long-term performance

Between March 3, 2016, and September 11, 2017, natural gas October futures rose 79.9%. On March 3, 2016, natural gas active futures closed at their 17-year low. During this period, the United States Natural Gas Fund LP ETF (UNG), which tracks natural gas futures, rose just 13% due to negative roll yield.

Our collection of natural gas–weighted stocks rose only 14% during this period. The gas-weighted stocks that outperformed during this period follow:

  • Rice Energy (RICE): 172.0%
  • WPX Energy (WPX): 87.9%
  • Cabot Oil & Gas (COG): 18.3%

The natural gas–weighted stocks that underperformed their peers between these two dates follow:

  • Southwestern Energy (SWN): -26.3%
  • Range Resources (RRC): -44.6%
  • Gulfport Energy (GPOR): -51.0%

To learn more about energy stocks, please visit Market Realist’s Energy and Power page.

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