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Natural Gas, Crude Oil, and the S&P 500: How Did They Perform?

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Natural gas and the S&P 500 Index

For the week ended July 1, 2016, August natural gas futures (UNG) (FCG) (UGAZ) (DGAZ) (BOIL) rose by 10.4%. The S&P 500 Index (SPY) (QQQ) rose by 3.2%. Among the SPDR ETFs, the Health Care Select Sector SPDR ETF (XLV) and the Utilities Select Sector SPDR ETF (XLU) rose the most.

Between June 24 and July 1, 2016, XLV rose by 4.1% as investors turned defensive following the United Kingdom’s vote to exit the European Union. XLU rose by 3.7% between June 24 and July 1. The utilities sector’s rally was driven by the fact that the Federal Reserve could delay an interest rate hike due to the Brexit vote shock. The returns of the SPDR ETFs are adjusted for dividends.

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Natural gas and crude oil

Crude oil futures (USO) (USL) rose by 2.8% in the week ended July 1, 2016. On June 29, crude oil futures rose by 4.2% after oil inventories fell by 4.1 million barrels in the week ended June 24. Analysts’ expectation was for a 2.3 million barrel fall in inventories.

Why natural gas beat the broader market and crude oil

Last week, between June 24 and July 1, natural gas futures contracts (GASL) (GASX) (FCG) rose by 10.4%. The rise in natural gas prices was due to higher temperatures, which boosted natural gas usage for cooling purposes, and a higher-than-expected fall in inventories in the week ended June 24.

On June 30, the EIA (U.S. Energy Information Administration) announced a 42 Bcf (billion cubic feet) addition to natural gas (UNG) (GASL) inventory levels in the week ended June 24. Analysts expected an addition of 46 Bcf, according to S&P Global Platts.

The rise in natural gas prices could be a key catalyst for natural gas–weighted stocks such as Gulfport Energy (GPOR), Comstock Resources (CRK), Abraxas Petroleum (AXAS), Range Resources (RRC), Antero Resources (AR), Rex Energy (REXX), Contango Oil & Gas (MCF), and Ultra Petroleum (UPL).

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