US Crude Oil Near a 2017 High—But Why Are Energy ETFs Falling?
Correlations of energy ETFs
Between October 19 and October 26, the Alerian MLP ETF (AMLP) had the highest correlation of 65.2% with US crude oil active futures. However, it fell 3.9% over this period—the most among our list of energy sub-sector ETFs. During this period, US crude oil prices rose 2.2% and were just 3.3% below their 2017 highest closing level. The Energy Select Sector SPDR ETF (XLE) had the second-highest correlation of 62.9% with oil prices. XLE’s losses were under 1%, as we discussed in the previous part of this series.
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In the trailing week, the VanEck Vectors Oil Services ETF (OIH) had a negative correlation of 6.9% while the SPDR S&P Oil & Gas Exploration & Production ETF’s (XOP) correlation was 10.1% with US crude oil prices. OIH fell 2.7%, while XOP was down 2.2%.
These four energy sub-sector ETFs had negative correlations with natural gas prices in the seven calendar days to October 26:
- OIH at -89.2%
- XOP at -46.3%
- AMLP at -17.7%
- XLE at -0.4%
Natural gas prices fell 1.1% over this period.
S&P 500 Index
Between October 19 and October 26, OIH had a correlation of just 31.1% with the S&P 500 Index (SPY). The S&P 500 Index fell 0.1% over this period. We already analyzed OIH’s correlations with oil and natural gas prices, which could indicate that industry and company-specific factors are dominating oilfield service stocks.
The trailing-week correlation of the other three energy ETFs with the S&P 500 Index are:
- XLE at 92.5%
- XOP at 81.6%
- AMLP at 50.8%