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Is Oil Losing Its Grip on Natural Gas–Weighted Stocks?

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Nov. 20 2020, Updated 1:25 p.m. ET

Natural gas–weighted stocks

On our list of natural gas–weighted stocks, Southwestern Energy (SWN) could be impacted the most by any changes in US crude oil prices. Southwestern Energy had a correlation of 35.9% with US crude oil May futures on March 21–28, 2018. Southwestern Energy had a negative correlation with natural gas prices during this period.

In the trailing week, except for Southwestern Energy, the natural gas–weighted stocks on our list had either a negative or a mild positive correlation with US crude oil May futures.

The natural gas–weighted stocks that could be inversely related to US crude oil prices based on the trailing week’s correlations with US crude oil May futures were:

  • Range Resources (RRC) at -31.8%
  • Cabot Oil & Gas (COG) at -32.4%
  • Antero Resources (AR) at -42.7%

All of these natural gas–weighted stocks are from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). They operate with a production mix of at least 60% in natural gas based on their latest quarterly production data.

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Oil’s role

Oil prices are important in order to understand natural gas supplies. In fact, oil prices are important for energy sector sentiments in general. So, any changes in oil prices would be vital to these natural gas–weighted stocks.

Apart from the movements in oil and natural gas prices, the sentiments in the broader market are also important for these natural gas–weighted stocks. All of the natural gas–weighted stocks on our list had correlations of more than 60% with the S&P 500 Index in the trailing week.

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