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

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

The Natural Gas–Weighted Stocks Most Aligned with Oil Prices

Correlations with crude oil

Between August 25 and September 1, Chesapeake Energy (CHK) and Range Resources (RRC) had the highest correlations of 68.9% and 55.3% with US crude oil (USL) active futures among our list of natural gas–weighted stocks. In fact, both these stocks had negative correlations with natural gas prices during this period, as we discussed in the previous part of this series.

The Natural Gas–Weighted Stocks Most Aligned with Oil Prices

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Following CHK and RRC, the following natural gas–weighted stocks had the highest correlations with US crude oil prices in the past five trading sessions.

  • WPX Energy (WPX) at 44.9%
  • Antero Resources (AR) at 14.7 %
  • Cabot Oil & Gas (COG) at 11.2%

The natural gas–weighted stocks with the lowest correlations with crude oil prices in the last five trading sessions were as follows.

  • EQT (EQT) at 5.1 %
  • Rice Energy (RICE) at 4.3%

EQT was among the top five natural gas–weighted stocks with the highest correlations with natural gas prices.

These natural gas–weighted stocks are all constituents of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), and at least 60% of their production is natural gas.

Oil’s importance

Market sentiment around crude oil could be crucial for the entire energy sector. In fact, natural gas prices can frequently track oil prices. In the next part of this series, we’ll discuss the returns of natural gas–weighted stocks. We’ll also analyze the impact of both natural gas and crude oil on these stocks’ returns.

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