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Week Ending August 7: UNG Gains, XLE Loses, but Less than USO

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The Energy Select Sector SPDR ETF

The Energy Select Sector SPDR ETF (XLE) lost 3.39% in the week ended August 7. This ETF tracks a diverse group of ~45 of the largest American energy stocks that constitute the S&P 500 Index (SPX).

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Comparing performances

In comparison, the broad market SPDR S&P 500 ETF (SPY) lost just 1.2%.

The United States Oil Fund (USO) fell ~6.61% in the week ending August 7. As a contrast, the United States Natural Gas Fund (UNG) gained 2.84%. USO and UNG track movements in prompt WTI crude oil and Henry Hub natural gas futures prices, respectively. UNG was the only gainer among our comparable securities for the week, while USO was the biggest loser. UNG gained due to improving natural gas prices. On the other hand, USO was down as a result of plunging crude oil prices in the week ending August 7. Prices fell ~7% between July 31–August 7.

Crude oil saw weakness following a bearish production number last week. You can read about it in Crude Oil Inventories Fall but Production Keeps Pressuring WTI.

Apart from upstream energy companies, weaker crude oil prices don’t bode well for MLPs such as MarkWest Energy Partners (MWE).

About XLE

XLE has exposure to many types of energy companies, with different exposures to energy prices. For example, XLE holds:

  • upstream oil and gas companies like ConocoPhillips (COP)
  • midstream energy companies like Kinder Morgan (KMI)
  • downstream or refining companies like Valero Energy (VLO)
  • oilfield equipment and services companies like Schlumberger (SLB)
  • integrated energy companies like Chevron Corporation (CVX)

XLE offers a safer, low-cost, and diversified exposure to energy prices. However, investors should also note that XLE is a market-weighted index ETF. Its top five securities constitute 44.42% of its weight, with Exxon Mobil (XOM) and CVX alone constituting 28.27%.

In the week ending August 7, XLE’s biggest losers were Consol Energy (CNX), which lost 20.39% between July 31–August 7, followed by Marathon Energy (MRO) and Range Resources (RRC), which lost 12.4% and 9.2%, respectively, in the same period.

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