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Is Oil Dominating Over Natural Gas-Weighted Stocks?

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Jun. 6 2019, Updated 10:33 a.m. ET

Natural gas–weighted stocks

The natural gas–weighted stocks on our list that had the highest correlations with natural gas July futures on May 29–June 5 were:

  • Gulfport Energy (GPOR) at 65.1%
  • Chesapeake Energy (CHK) at 64.9%
  • Cabot Oil & Gas (COG) at 52.5%

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.

However, all the natural gas–weighted stocks on our list had higher correlations with US crude oil prices:

  • Chesapeake Energy at 93.3%
  • Cabot Oil & Gas at 89%
  • Gulfport Energy at 76%

Except Cabot Oil and Gas, all of these natural gas–weighted stocks had a correlation of at least 75% with the S&P 500 Index (SPY). Cabot Oil & Gas had a mild negative correlation of 6.8% with the equity index.

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Oil’s significance

Oil prices can have a significant impact on the entire energy sector not just on oil-weighted stocks. US crude oil prices are important in order to understand the US natural gas supply. Oil prices are often important for the energy sector’s general sentiment, which explains the different trend in correlations among natural gas–weighted stocks with oil and natural gas prices.

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