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Tracking Natural Gas–Weighted Stocks after the Inventory Report

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Dec. 4 2020, Updated 10:43 a.m. ET

 Natural gas

On December 13, 2017, natural gas (UNG) (BOIL) January futures rose 1.4% and closed at $2.715 per MMBtu (million British thermal units). On the same day, natural gas prices rebounded from the lowest closing price since February 27, 2017.

In the past five trading sessions, natural gas prices fell 7.1%. Oversupply fears have gripped natural gas prices. However, a gain of 1.1% in US crude oil during this period could support the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA). These equity indexes could be impacted less by natural gas’s fall in the short term.

The EIA’s STEO (Short-Term Energy Outlook) report estimates a rise of 6.1 Bcf (billion cubic feet) per day in US dry natural gas production in 2018 over 2017. It could be a bearish factor for natural gas prices.

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Correlations of natural gas–weighted stocks

The natural gas–weighted stocks that could be volatile with natural gas’s movement, according to the correlations with natural gas prices in the last five trading sessions, are:

  • EQT (EQT) at 99.1%
  • Southwestern Energy (SWN) at 89.2%
  • Cabot Oil & Gas (COG) at 88.1%
  • Range Resources (RRC) at 83.9%

These stocks could take a hit if the EIA’s natural gas inventory report on December 14, 2017, doesn’t lift natural gas prices.

The natural gas–weighted stocks that might deviate from natural gas’s movement, according to the correlations with natural gas prices in the last five trading sessions, are:

  • Chesapeake Energy (CHK) at 42.7%
  • WPX Energy (WPX) at 1.2%

In the next part, we’ll discuss the correlations of these natural gas–weighted stocks with oil. All of these natural gas–weighted stocks with at least 60.0% production mixes in natural gas have been taken from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

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