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Is Oil Limiting Natural Gas–Weighted Stocks’ Fall?

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Returns

Between January 3 and January 10, our selection of natural gas–weighted stocks fell 3.8%—40 basis points more than natural gas February futures’ decline over this period. The natural gas–weighted stocks with the highest rise or lowest fall between these two dates are as follows.

  • WPX Energy (WPX) at 0.1%
  • EQT (EQT) at -1.6%
  • Chesapeake Energy (CHK) at -1.7%

These natural gas–weighted stocks had the highest correlations with US crude oil prices, as we discussed in the previous part of this series. Moreover, WPX and CHK had higher correlations with oil prices than natural gas prices—which could be behind the small rise in WPX. Moreover, a 3.1% rise in US crude oil futures could have limited CHK’s fall.

These natural gas–weighted stocks are part of a list that was collected from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). These stocks operate with at least 60% production mixes in natural gas.

The natural gas–weighted stocks with the biggest fall between these two dates are:

  • Range Resources (RRC) at -5.8%
  • Gulfport Energy  (GPOR) at -6%
  • Southwestern Energy (SWN) at -8.5%
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Since the 2016 low

Between March 3, 2016, and January 10, 2018, natural gas active futures spiked 77.3%. In the third month of 2016, natural gas prices were at a 17-year low.

ETFs that take positions in natural gas futures, the ProShares Ultra Bloomberg Natural Gas (BOIL) and the United States Natural Gas ETF (UNG) have fallen 30.8% and 0.7%, respectively, from this low. Natural gas–weighted stocks rose 6.7% since March 3, 2016.

The biggest gainers among natural gas–heavy stocks during this period are:

  • WPX Energy (WPX) at 176.4%
  • Cabot Oil & Gas (COG) at 27.3%

The biggest losers in this period are:

  • Southwestern Energy (SWN) at -26.3%
  • Range Resources (RRC) at -45.1%
  • Gulfport Energy at -49.7%
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