WTI crude oil prices traded down 2% on the week
On May 30, the price of the WTI crude front month contract closed at $102.71 per barrel—down 2% from the $104.35 per barrel close the week prior. WTI crude oil prices fell over the week on weak U.S. consumer spending figures, as well as speculation that U.S. oil inventories were on the rise.
WTI crude prices have remained relatively high and stable over the past year
For most of the last two years, WTI crude oil has been range-bound between ~$85 per barrel and ~$110 per barrel. Higher crude prices generally have a positive effect on stocks in the energy sector. Upstream names that produce oil and gas see higher revenues, cash flows, and returns from higher oil prices. As a result, this causes upstream companies to invest more money in drilling more oil wells, which benefits oilfield service companies.
The previous graph shows WTI crude oil price movements compared to a few major energy ETFs as well as ExxonMobil (XOM). The ETFs displayed are the Energy Select Sector SPDR (XLE), the Market Vectors Oil Services ETF (OIH), and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). The XLE OIH is a cap-weighted ETF with holdings in upstream energy (including both independents and integrateds), downstream energy, and oilfield services with a large weighting towards megacaps such as ExxonMobil (XOM) and Schlumberger (SLB). The OIH ETF is a cap-weighted ETF focused on oilfield services. XOP is an equal-weighted ETF focused on upstream energy companies.
Oil prices’ move up last week is a positive indicator for many major energy companies, such as XOM and SLB, and energy ETFs such as XLE, XOP, and OIH.
Continue to the next part of this series to learn about important changes in natural gas prices.