Why Oil Could Determine Fate of Natural Gas–Weighted Stocks

Natural gas–weighted stocks and oil

Natural gas–weighted stocks with the highest correlations with oil (USO) (USL) prices in the seven calendar days to October 30, 2017, include the following:

  • Gulfport Energy (GPOR): 98.9%
  • WPX Energy (WPX): 96.2%
  • Cabot Oil & Gas (COG): 82.1%
  • Rice Energy (RICE): 51.3%
  • Southwestern Energy (SWN): 48.2%

Why Oil Could Determine Fate of Natural Gas–Weighted Stocks

COG and WPX were among the top three gainers on our list of natural gas–weighted stocks in the past five trading sessions. We’ll look at that in more detail in the next part of this series. RICE and SWN were among the natural gas–weighted stocks with the most negative correlations to natural gas prices. We looked at that in the previous part of this series.

SWN rose more than 4%, and RICE’s losses were below 1% in the trailing week. From October 23–30, 2017, natural gas futures fell 6%, while US crude oil futures rose 4.3%. So sentiments related to oil could be behind the price performance of these natural gas–weighted stocks.

Below are the natural gas–weighted stocks with the least correlation to oil prices in the trailing week:

  • Antero Resources (AR): 4%
  • Range Resources (RRC): 2%

AR and RRC also had negative correlations with natural gas prices. They were among the top losers on our list of natural gas–weighted stocks. These two stocks could have ignored fluctuations in oil as well as natural gas prices.

Oil’s role

All these natural gas–weighted stocks had higher correlations with oil prices compared to natural gas. Often, oil prices guide natural gas prices and the entire energy sector. That could be the reason behind the strong bond between most of these natural gas–weighted stocks and oil prices in this short time frame.