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Oil Is Steering Natural Gas–Weighted Stocks’ Returns

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Natural gas–weighted stocks’ returns

On October 10–17, our list of natural gas–weighted stocks fell 0.3%, while natural gas November futures rose 1.1%. On average, natural gas–weighted stocks underperformed natural gas futures during this period.

Chesapeake Energy (CHK) was the only natural gas–weighted stocks on our list that closed in the green in the past five trading sessions. Chesapeake Energy had the highest correlations with US crude oil prices during this period, which we discussed in the previous part. US crude oil November futures fell 4.7% during this period.

Chesapeake Energy moved in tandem with oil prices in all of the instances in the trailing week. On October 17, Chesapeake Energy fell 2.5% compared to 3% downside in US crude oil prices.

The natural gas–weighted stocks that fell the most in the past five trading sessions were:

  • Gulfport Energy (GPOR) fell 0.6%.
  • Cabot Oil & Gas (COG) fell 0.8%.
  • Antero Resources (AR) fell 2%.

All of the natural gas–weighted stocks on our list had higher correlations with US crude oil than with natural gas prices, which we discussed in the previous two parts.

These 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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Since March 2016

Between March 3, 2016, and October 17, 2018, natural gas active futures rose 102.6% from a 17-year low. Our list of natural gas–weighted stocks fell 21.2% during the same period.

Chesapeake Energy and Cabot Oil & Gas have risen 10.1% and 9.2%, respectively, since March 3, 2016. They were the only gainers on our list of natural gas–weighted stocks during this period. Let’s take a look at the natural gas–weighted stocks that fell the most during this period:

  • Southwestern Energy (SWN) fell 25.2%.
  • Range Resources (RRC) fell 43.3%.
  • Gulfport Energy fell 56.5%.
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