Natural Gas Prices Cool: How Are Gas-Heavy Stocks Reacting?



Natural gas

On October 3, 2016, natural gas futures (UNG) (BOIL) (FCG) contracts for November delivery closed at $2.92 per MMBtu (million British thermal units)—0.6% above its previous closing price.

In the last few trading sessions, natural gas prices have been subdued because of cooler weather forecasts.

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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 September 3 and October 3, 2016:

  • Southwestern Energy (SWN) – 40.7%
  • Rice Energy (RICE) – 37%
  • Chesapeake Energy (CHK) – 33.9%
  • Antero Resources (AR) – 27.2%
  • EQT (EQT) – 17.8%
  • Cabot Oil & Gas (COG) – 13.8%
  • Range Resources (RRC) – 8.8%

The following natural gas–weighted stocks correlated the least with natural gas futures over this period:

  • WPX Energy (WPX) at 3.7%
  • Gulfport Energy (GPOR) at -0.5%

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.


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