Natural gas

On December 27, 2017, natural gas (BOIL) (FCG) February futures rose 2.9% and settled at $2.73 per MMBtu (million British thermal unit). That was 6.6% above their lowest closing price in 2017. That same day, both the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 0.1%. These equity indexes may be more reactive to the 0.6% fall in US crude oil prices on December 27 than to the gains in natural gas prices.

Natural Gas Inventory Data: Natural Gas–Weighted Stocks to Watch

The gap between natural gas inventories and their five-year average defined by the inventories spread might share an inverse relationship with natural gas prices. In the week ended December 15, 2017, the inventories spread was -2.4%. In other words, natural gas inventories were 2.4% below their five-year average, according to EIA (U.S. Energy Information Administration) data on December 21, 2017. In the previous week, the inventories spread was -0.7%. So the inventories spread expanded into negative territory. In fact, natural gas prices rose 5.4% between December 21 and December 27, 2017.

In the week ended December 22, 2017, a fall of more than 109 Bcf (billion cubic feet) could help the inventories spread expand into negative territory. On December 28, 2017, the EIA will release its natural gas inventory data for the week ended December 22. The market expects a fall of 115 Bcf in natural gas inventories for that week. The expansion of the inventories spread into more negative territory might help natural gas prices rise further.

Natural gas–weighted stocks

Natural gas–weighted stocks that could catch the possible upside in natural gas prices after the inventory data, based on their trailing week’s correlations with natural gas futures, are the following:

  • Antero Resources (AR): 36.1%
  • Gulfport Energy (GPOR): 35.8%

Natural gas–weighted stocks that may not move with natural gas prices based on the past four trading sessions’ correlations with natural gas prices are the following:

  • EQT (EQT): -2.8%
  • Chesapeake Energy (CHK): -7.7%

All these natural gas–weighted stocks have been gathered from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and have at least a 60% production mix in natural gas.

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