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Crude Oil above $50: Which Energy Stocks Could Benefit?

PART:
1 2 3 4 5
Part 3
Crude Oil above $50: Which Energy Stocks Could Benefit? PART 3 OF 5

Natural Gas above $3: Which Gas-Weighted Stocks Could Gain?

Natural gas

On September 18, 2017, natural gas (UNG) (BOIL) October futures closed at $3.15 per MMBtu (million British thermal units), which is 4% above the previous closing price. Between September 11 and September 18, 2017, natural gas active futures rose 6.6%.

Among the equity indexes that have some exposure to the energy sector, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 0.6% and 1.2%, respectively, during this period.

Natural Gas above $3: Which Gas-Weighted Stocks Could Gain?

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The anticipation of higher winter seasonal demand could be behind the rise in natural gas prices despite mild weather forecasts. On September 14, 2017, the Climate Prediction Center forecast the chances of La Niña in the Northern Hemisphere during the winter of 2017–2018 to be 55%–60%. The effects of La Niña could boost natural gas usage during the cold winter months.

Natural gas–weighted stocks

The natural gas–weighted stocks that could gain alongside the rise in natural gas prices are based on the correlations in the trailing week, as listed below. The percentages indicate each company’s correlation with natural gas.

  • Southwestern Energy (SWN): 94.5%
  • Range Resources (RRC): 90.6%
  • Gulfport Energy (GPOR): 88.8%
  • Antero Resources (AR): 86.3%
  • WPX Energy (WPX): 84.0%

Range Resources was the largest gainer among our collection of gas-weighted stocks in the five trading days to September 18, 2017. These natural gas–weighted stocks are from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). All these oil-weighted stocks operate with a minimum 60% production mix in natural gas.

Natural gas–weighted stocks that had the lowest correlations with natural gas prices during this period follow:

  • Cabot Oil & Gas (COG): 74.6%
  • EQT Corp. (EQT): 70.3%

In the next part, we’ll discuss the correlations of these gas-weighted stocks with crude oil.

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