These Gas-Weighted Stocks Are Sensitive to Natural Gas’s Moves


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

Natural gas

On November 21, natural gas December futures fell 1.6% settled at $4.45 per million British thermal units. The colder winter forecast might be behind the fall in natural gas prices.

According to Reuters, for the next two weeks, Refinitiv analysts reduced the total degree days to 388 on November 21 from 390 on November 20 in the Lower 48 US states. The decrease might result in lower natural gas use for heating than previously expected, which might have dragged natural gas prices in the last trading session. However, the total degree days are still higher than the 30-year average of 347 for these weeks.

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Natural gas–weighted stocks

The natural gas–weighted stocks that could be sensitive  to natural gas prices based on their correlations in the trailing week are:

  • Southwestern Energy (SWN) at 49.7%
  • Cabot Oil & Gas (COG) at 36.3%
  • Range Resources (RRC) at 30.9%.

On our list of natural gas–weighted stocks, only Chesapeake Energy (CHK) had a negative correlation of 38.2% with natural gas prices during this period.

Later in this series, we’ll discuss natural gas–weighted stocks’ returns. First, we’ll analyze the correlations of these natural gas–weighted stocks with US crude oil prices. Oil prices can have a significant impact on the entire energy sector, not just on oil stocks.

The natural gas–weighted stocks mentioned above 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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