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Crude Oil and Natural Gas Diverge: The Impact on Energy Stocks

PART:
1 2 3 4 5
Part 5
Crude Oil and Natural Gas Diverge: The Impact on Energy Stocks PART 5 OF 5

Is Crude Oil Dragging on Natural Gas–Weighted Stocks?

Natural gas–weighted stocks

Between August 25 and September 1, natural gas–weighted stocks, on average, rose 2.9% while natural gas (UNG) October futures rose 5%. Last week, US crude oil (USO)(DBO) October futures fell 1.2%.

Is Crude Oil Dragging on Natural Gas–Weighted Stocks?

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Natural gas–weighted stocks that outperformed during this period are as follows.

  • Cabot Oil & Gas (COG) at 8.1%
  • Gulfport Energy (GPOR) at 7.4%
  • Southwestern Energy (SWN) at 6.6%

These three stocks had correlations of more than 70% with natural gas prices, as we discussed in Part 3 of this series.

The natural gas–weighted stocks that underperformed over this period are as follows.

  • WPX Energy (WPX) at 0.7%
  • Chesapeake Energy (CHK) at -0.8%
  • Range Resources (RRC) at -1.8%

These three natural gas–weighted stocks had the highest correlations with US crude oil prices in the week ended September 1. In fact, CHK and RRC had negative correlations with natural gas prices. Both these stocks closed in the red and followed oil’s fall. We discussed their correlations it in parts 3 and 4 of this series.

Long-term performance

Between March 3, 2016, and September 1, 2017, natural gas active futures rose 87.2%. On March 3, 2016, natural gas active futures were at the lowest closing level in 17 years. However, during this period, the United States Natural Gas Fund LP (UNG) rose only 17.3% because of negative roll-yield. The fund tracks natural gas futures.

Natural gas–weighted stocks rose 17% between these two dates. The gas-weighted stocks below outperformed during this period.

  • Rice Energy (RICE) at 175.2%
  • WPX Energy (WPX) at 92.1%
  • Cabot Oil & Gas (COG) at 22.1%

The following gas-weighted stocks underperformed during this period.

  • Southwestern Energy (SWN) at -22.6%
  • Range Resources (RRC) at -41.7%
  • Gulfport Energy (GPOR) at -49%

For more updates on energy stocks, please visit Market Realist’s Energy and Power page.

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