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These Stocks Could Suffer from Weakness in Natural Gas

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Natural gas

On December 20, 2017, natural gas (UNG) (BOIL) January futures fell 2%. On the same day, natural gas futures settled at $2.64 per MMBtu. Natural gas’s supply concerns could be behind the weakness in natural gas prices.

Between December 13 and December 20, 2017, natural gas January futures fell 2.9%, while US crude oil prices rose 2.7%. Over this period, both the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 0.6%.

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Natural-gas-weighted stocks to watch

Between December 13 and December 20, 2017, the natural-gas-weighted stocks with the highest correlations with natural gas prices in the trailing week are:

  • EQT (EQT) at 87.4%
  • Southwestern Energy (SWN) at 81%
  • Range Resources (RRC) at 76.6%
  • Cabot (COG) at 75.6%
  • Gulfport Energy (GPOR) at 75.2%

WPX’s correlation with natural gas futures over this time period was 18.4%, the least among natural-gas-weighted stocks. We have taken these natural-gas-weighted stocks from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), and they all have production mixes of at least 60% in natural gas.

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