Natural gas

On May 22, 2017, natural gas futures (UNG)(BOIL)(FCG) contracts for June 2017 delivery gained ~2.3% to close at $3.33 per MMBtu (million British thermal units). Though cooler weather forecasts drove natural gas prices higher in the last two trading sessions, traders should stay wary of the rising US oil and natural gas rig count.

These Energy Stocks Could Be More Dependent on Natural Gas

Natural gas June futures are down 0.6% on a closing price basis in the trailing week to May 22, 2017. In comparison, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) fell 0.9%, and the S&P 500 Index (SPY)(IVV)(VNN)(SPX-INDEX) fell 0.3% during this same period. Energy accounts for 6.6% of the S&P 500 Index.

Examining the correlation

The following natural gas–heavy upstream companies highly correlated with natural gas futures from May 15, 2017, to May 22, 2017:

  • Gulfport Energy (GPOR): 87.8%
  • EQT (EQT): 81.5%
  • Cabot Oil & Gas (COG): 81.2%
  • Rice Energy (RICE): 73.8%
  • Southwestern Energy (SWN): 52.7%

They all operate with production mixes of at least 60.0% in natural gas (UNG)(BOIL)(GASL)(FCG) and are in the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

WPX Energy (WPX), at 32.4%, and Antero Resources Corporation (AR), at 32%, were the least correlated with natural gas futures during the same period.

Our analysis

Before arriving at a conclusion, we’ll also examine the correlation of these gas-weighted stocks with crude oil in the next part of this series.

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