Gas Rallied and Stock Investors Couldn't Care Less: Chart

  • Shares of energy producers more closely tracking oil prices
  • Natural gas drillers lumped into exploration, production ETFs

U.S. natural gas just staged a year-end rally, and you’d hardly know it looking at stocks of the fuel’s biggest explorers.

Prices of the heating and power plant fuel are up 12 percent from a week ago on the outlook for colder weather. A Bloomberg index of 18 energy producers that drill for more gas than oil slid 4 percent in the same period, tracking crude futures down instead.

For better or worse, “oil leads the parade in all cases,” simply because it’s the more heavily traded commodity, said Vincent Piazza, senior oil and gas analyst for Bloomberg Intelligence. Gas-heavy explorers are also lumped into exchange-traded funds that track the general exploration and production industry, and those tend to trade more closely with oil, said Fadel Gheit, a New York-based analyst for Oppenheimer & Co.

Oil’s dominance over the gassiest of producers highlights how dramatically energy production has shifted. More than 80 percent of rigs in the U.S. were drilling for natural gas a decade ago. It’s now the target fuel for less than a quarter as explorers shifted toward more profitable crude plays.

That has left drillers who held out and still primarily produce gas hostage to oil prices. Southwestern Energy Co., the third-largest North American gas producer, behind only Exxon Mobil Corp. and Chesapeake Energy Corp., fell 6.1 percent amid the 12 percent gas rally.

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