Is Natural Gas Diverging from Rise in Oil?
In the past five trading sessions
Between October 4 and October 11, 2017, natural gas (UNG) (BOIL) active futures had a correlation of 84.3% with US crude oil futures. During this period, US crude oil (OIIL) (USL) (DBO) November futures rose 2.6%, and natural gas futures fell 1.7%.
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In the past five trading sessions, natural gas and crude oil mostly moved in opposite directions. However, on October 10, 2017, US crude oil prices rose 2.7% and natural gas rose 2%.
But, while the moves were sufficient to push the statistical relationship between natural gas and crude oil to strongly positive territory in this short period, the gains in natural gas prices were not sufficient to push the trailing week gains into positive territory.
In fact, on a 30-day rolling basis, the correlation between natural gas and crude oil is at a far weaker 30% as of October 11. From May to July 2017, natural gas and the US crude oil 30-day rolling correlation was positive in most of the instances and exceeded 30%.
In part one of this series, we discussed the factors that were behind natural gas’s fall. Saudi Arabia’s plan to cut its oil exports could be behind oil’s rise.
Oil prices could be a key indicator for natural gas prices as discussed in part two of this series. In fact, on a short-term basis, natural-gas-weighted stocks such as Cabot Oil & Gas (COG) and Gulfport Energy (GPOR) may be more correlated to crude oil compared to natural gas.
For key statistics on oil and natural gas prices, track our Energy and Power page.