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Do Gas-Weighted Stocks’ Returns Match Natural Gas’s Gains?

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Natural gas–weighted stocks’ returns

Between August 14 and August 21, 2017, natural gas–weighted stocks fell 1.1% compared to a 0.1% rise in the natural gas September futures during this period. In the trailing week, natural gas prices outperformed natural gas–weighted stocks.

Range Resources Corporation (RRC) rose the most among the natural gas–weighted stocks, rising 4.0% in the trailing week. These upstream (or natural gas–weighted) stocks are included in the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Other natural gas–weighted stocks that outperformed their peers between August 14 and August 21, 2017, are Cabot Oil & Gas (COG) and Antero Resources (AR). These two stocks rose just 0.2% and 0.1%, respectively, during this period.

In the seven calendar days ended August 21, 2017, Chesapeake Energy (CHK), WPX Energy (WPX), and EQT Corp. (EQT) fell 6.1%, 3.0%, and 2.7%, respectively. These three stocks were the underperformers among our list of natural gas–weighted stocks.

WPX and CHK were among the gas-weighted stocks that had the highest correlations with oil prices during this period, as we discussed in Part 4 of this series. US crude oil futures fell 0.4% in the trailing week.

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Long-term price performance

From March 3, 2016, to August 21, 2017, natural gas active futures recovered 80.5% from their 17-year low. However, natural gas–weighted stocks rose only 11.7%—far less than the rise in natural gas prices during this period.

Between March 3, 2016, and August 21, 2017, Rice Energy (RICE), WPX Energy (WPX), and Cabot Oil & Gas (COG) rose 165.6%, 84.6%, and 11.3%, respectively. These three stocks outperformed their peers.

However, during the same period, Southwestern Energy (SWN), Range Resources (RRC), and Gulfport Energy (GPOR) fell 29.4%, 42.5%, and 53.1%, respectively. These three stocks underperformed their peers.

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