On September 26, 2016, natural gas futures (UNG) (BOIL) (FCG) contracts for November delivery closed at $3.06 per MMBtu (million British thermal units)—1.4% above its previous closing price. Natural gas prices are near their 20-month high.
Natural gas prices have been rising due to record heat in September that led to higher demand for natural gas in gas-fired power plants. Prices also rose due to slowing supply growth even though demand has been rising.
What’s the correlation?
In this part of the series, we’ll look at the correlation of upstream companies that operate with a production mix of at least 60% in natural gas (UNG) (BOIL) (UGAZ) (GASX) (GASL) (FCG) with natural gas prices. These upstream companies are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
The following upstream companies had the greatest correlation to natural gas futures between August 26 and September 26, 2016:
- Southwestern Energy (SWN) – 49.2%
- Rice Energy (RICE) – 41.2%
- Chesapeake Energy (CHK) – 40.5%
- EQT (EQT) – 34.3%
- Antero Resources (AR) – 31.2%
- Cabot Oil & Gas (COG) – 28.3%
- Range Resources (RRC) – 5.7%
The following natural gas–weighted stocks correlated the least with natural gas futures over this period:
Natural gas–weighted stocks with high correlations to natural gas futures moved with natural gas. On the other hand, stocks with low correlations weren’t impacted as much by natural gas price movements.
In the next part of this series, we’ll see how natural gas–weighted stocks performed compared to natural gas.