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Are Energy ETFs Outperforming Crude Oil?

PART:
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Are Energy ETFs Outperforming Crude Oil? PART 1 OF 5

US Oil Nearing $50: Are Energy ETFs Beating Crude Oil’s Losses?

US crude oil prices

On April 20, 2017, US crude oil (DBO) (OIIL) (USL) (SCO) futures contracts for June delivery closed at $50.71 per barrel, a ~0.30% fall over the previous trading session.

US Oil Nearing $50: Are Energy ETFs Beating Crude Oil’s Losses?

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US crude oil inventories fell 1.0 MMbbls (million barrels) to ~532.3 MMbbls in the week ended April 14, 2017, according to EIA (U.S. Energy Information Administration) data released on April 19, 2017. However, a rise of 1.5 MMbbls in motor gasoline caused a 3.8% fall in WTI (West Texas Intermediate) crude oil June futures on April 19.

US oil production reached ~9.3 MMbbls per day in the week ended April 14, 2017. That’s a rise of ~0.56 MMbbls per day since the OPEC (Organization of the Petroleum Exporting Countries) production cut in November 2016. The rise in US oil production amounts to 46.7% of OPEC’s pledged output cuts.

From April 13–20, 2017, US crude oil futures contracts for June fell 5.4%. Rising US oil production and demand concerns contributed to oil’s losses. On April 20, 2017, the IEA (International Energy Agency) cut its crude oil demand growth forecast for 2017 to 1.3 MMbbls per day, a fall of 0.10 MMbbls per day from its earlier forecast.

From April 13–20, 2017, the S&P 500 Index (SPY) (IVV) (VNN) (SPX-INDEX) rose 1.2%, and the Dow Jones Industrial Average Index (DIA) (DJIA-INDEX) rose 0.70%. The S&P 400 MidCap 400 Index (IVOO) (MID-INDEX) rose 2.4% during that same period. The FTSE 100 Index (UKX-INDEX) (EWU) fell 2.8%, while the CAC 40 Index (PX1-INDEX) (EWQ) rose 0.10% during that period. Movements in crude oil can drive the broader equity markets.

Natural gas prices

Natural gas (UNG) May futures fell 2.1% from April 13–20, 2017. On April 20, 2017, natural gas active futures fell 0.80% and closed at $3.16 per MMBtu (million British thermal units). On April 20, 2017, the EIA announced its natural gas inventory data for the week ended April 14, 2017. We’ll take a look at that data in Part 3 of this series. Bearishness due to mild weather also contributed to losses in natural gas prices.

Performances of energy ETFs

Here’s how some energy ETFs performed from April 13–20, 2017:

  • Energy Select Sector SPDR ETF (XLE): fell 1.7%
  • Alerian MLP ETF (AMLP): fell 0.10%
  • SPDR S&P Oil & Gas Exploration & Production ETF (XOP): fell 3.7%
  • VanEck Vectors Oil Services ETF (OIH): fell 2.6%

Understanding ETF performances

In the following parts of this series, we’ll look at what drove the performances of energy ETFs. Let’s start by taking a look at the performance of the United States Oil ETF (USO).

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