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Energy Commodities Fell, Gas-Weighted Stocks Reacted

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Natural gas and gas-weighted stocks

In the trailing week to June 19, 2017, natural gas (UNG) (FCG) July futures fell 4.3%. On average, these natural gas–weighted stocks fell 1.3%. Except for Rice Energy (RICE), all of the other natural gas–weighted stocks ended in red in the week ending June 19, 2017. However, the 20% rise in Rice Energy shares during the same period reduced the downside of the average returns of these gas-weighted stocks.

Below are the gas-weighted stocks that fell the least in the week ending June 19, 2017.

  • Antero Resources (AR) fell 0.7%.
  • Cabot Oil & Gas (COG) fell 0.8%.

Natural gas–weighted stocks that underperformed on June 12–19, 2017, were:

WPX Energy and Gulfport Energy had higher correlations with US crude oil futures in the week ending June 19, 2017. US crude oil August futures fell 4.1% on June 12–19, 2017.

EQT had the highest correlation with natural active futures during the same period, as we discussed in Part 3.

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Returns since March 3, 2016

On March 3, 2016, natural gas active futures closed at a 17-year low. Between March 3, 2016, and June 19, 2017, natural gas active futures rose 76.2%—compared to a 13.7% rise in the natural gas–weighted stocks on average.

US natural gas prices have been in a downturn since 2008. For more than a decade, weak natural gas prices impacted the financial health of these natural gas–weighted companies. Weak prices impacted natural gas–weighted stocks’ ability to align themselves with natural gas price movements. The same pattern could continue if natural gas weakens more because of stronger crude oil prices.

Below are the natural gas–weighted stocks that outperformed between March 3, 2016, and June 19, 2017.

  • Rice Energy rose 146.7%.
  • WPX Energy (WPX) rose 72.9%.
  • Chesapeake Energy (CHK) rose 16.9%.

Rice Energy rose more than natural gas futures during the same period.

Natural gas–weighted stocks that fell the most between March 3, 2016, and June 19, 2017, were:

  • Southwestern Energy (SWN) fell 20%.
  • Range Resources (RRC) fell 27.5%.
  • Gulfport Energy (GPOR) fell 47.8%.

In the trailing week, natural gas active futures underperformed natural gas–weighted stocks, which were helped by Rice Energy’s stellar spike. Since March 3, 2016, natural gas was the outperformer.

To understand upstream industry energy stocks, read Everything You’d Better Know about Upstream Energy Companies.

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