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Are Natural Gas–Weighted Stocks More Sensitive to Oil?

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Dec. 4 2020, Updated 10:53 a.m. ET

Natural gas–weighted stocks

The natural gas–weighted stocks under review that are sensitive to US crude oil October futures’ movements based on their correlations with US crude oil October futures in the last five trading sessions are:

  • Antero Resources (AR) at 95.7%
  • Southwestern Energy (SWN) at 94.3%
  • Gulfport Energy (GPOR) at 86.5%
  • Range Resources (RRC) at 80.9%

On our list of natural gas–weighted stocks, none of the stocks had positive correlations of less than 43% with US crude oil October futures in the past five trading sessions. Southwestern Energy and Gulfport Energy had negative correlations with natural gas futures during this period.

The above-mentioned natural gas–weighted stocks are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). They operate with production mixes of at least 60.0% in natural gas.

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Oil’s role

US crude oil prices are important to understand US natural gas supplies. Oil prices are often important for the energy sector’s general sentiment. Except for Chesapeake Energy (CHK), all of the natural gas–weighted stocks had higher and positive correlations with US crude oil than natural gas prices.

Next, we’ll analyze natural gas–weighted stocks’ returns and see how their correlations with crude oil and natural gas might have driven their returns.

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