Why Oil’s Fall Could Be Trouble for Natural Gas–Weighted Stocks



Natural gas–weighted stocks

Below is the list of natural gas–weighted stocks that belong to the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) along with their correlations with US crude oil prices in the trailing week. These stocks may be most influenced by oil’s downward journey, as we discussed in Part 1 of this series:

  • EQT Corp (EQT) at 91.5%
  • Chesapeake Energy (CHK) at 85.2%
  • Gulfport Energy (GPOR) at 50.1%

These four natural gas–weighted stocks had negative correlations of over 50% with natural gas prices, as we discussed in the previous part of this series.

The natural gas–weighted stocks listed below from XOP have either ignored or moved inversely with US crude oil prices, based on their past five trading sessions’ correlations with US crude oil futures:

  • Antero Resources (AR) at 9.1%
  • Cabot Oil & Gas (COG) at -39.1%

AR and COG have the least negative correlations with natural gas futures over this period. All these natural gas–weighted stocks have at least 60% production mixes in natural gas.

Oil impacts natural gas supplies and the energy sector. So these natural gas–weighted stocks tend to be more aligned with oil than natural gas prices.

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Correction: An earlier version of this article included WPX Energy (WPX) among its discussion of natural gas–weighted stocks. However, the company’s commodity mix is weighted toward oil, at 56% oil, 12% NGLs, and 32% natural gas in 2017 and an expected 64% oil, 16% NGLs, and 20% natural gas for 2018. We regret this error.  


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