Oil’s Moves Are Vital for Gas-Weighted Stocks

Natural gas–weighted stocks

The natural gas–weighted stocks that had the highest correlations with oil (OIIL) (DBO) prices on October 16–23, 2017, are:

  • Gulfport Energy (GPOR) at 92.2%
  • Rice Energy (RICE) at 88.6%
  • WPX Energy (WPX) at 86.7%
  • EQT (EQT) at 80.4%

Oil’s Moves Are Vital for Gas-Weighted Stocks

As you can see in the above chart, these natural gas–weighted stocks have higher correlations with crude oil than the gas-weighted stocks with the highest correlations to natural gas that we discussed in the previous part.

The natural gas–weighted stocks that had the least correlations with oil prices in the past five trading sessions are:

  • Southwestern Energy (SWN) at -80.9%
  • Chesapeake Energy (CHK) at -90.7%

Interestingly, Chesapeake Energy also had the second most negative correlation with natural gas prices on our list of natural gas–weighted stocks. The stock is moving independently from underlying energy prices.

All of the natural gas–weighted stocks discussed above are from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). The natural gas–weighted stocks’ classifications also depend on their production mix of at least 60% in natural gas.

Oil’s role

Usually, oil prices are important for natural gas production. So, natural gas prices can depend on oil. Oil is important for the whole energy sector. Gas-weighted stocks had higher a correlation with oil prices in the seven calendar days to October 23, 2017—compared to natural gas prices. The higher correlation shows that crude oil prices are important.