Are Natural Gas Prices Underperforming Crude Oil?


Nov. 20 2020, Updated 4:06 p.m. ET

Past five trading sessions: correlation

Between October 25 and November 1, 2017, natural gas (GASL) (GASX) active futures had a correlation of -51.1% with US crude oil (USO) (DBO) futures. During this period, US crude oil (OIIL) (USL) (DBO) futures rose 4.1%, while natural gas futures fell 6.1%.

The factors behind the fall in natural gas are discussed in the first two parts of this series. For an analysis of crude oil prices, check out Is It Time for Oil’s Bull Run?

Meanwhile, the possible extension of the OPEC (Organization of the Petroleum Exporting Countries) production deal beyond March 2018 could be supporting oil prices.

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However, the past 30-day-rolling correlation between natural gas and US crude oil was just at -4.7% on November 1, 2017. The past 30-day-rolling correlation between the two energy commodities was positive and many times exceeded 30% between May to July 2017, pointing to a positive relationship between the two energy commodities.

US crude oil prices are important for natural gas prices. Sentiment surrounding oil can affect the entire energy commodities spectrum. In fact, over a short span, natural-gas-weighted stocks such as Gulfport Energy (GPOR), WPX Energy (WPX), and Cabot Oil & Gas (COG) can have higher correlations with oil prices than with natural gas.

For key energy updates, follow Market Realist’s Energy and Power page.


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