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XLE Fell but USO Held Up Last Week

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The Energy Select Sector SPDR ETF

The Energy Select Sector SPDR ETF (XLE) fell 2.98% in the week ended September 4. 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) fell 3.36%. The United States Oil Fund (USO) was the only gainer among the comparable group of securities that we discuss in this article in the week ended September 4. It gained 1.34%. The United States Natural Gas Fund (UNG) fell by 2.49%. USO and UNG track movements in prompt WTI crude oil and Henry Hub natural gas futures prices, respectively. The spike in USO was thanks to the rise in crude oil prices, which increased 1.83% between August 28 and September 4. On the other hand, natural gas prices fell by 2.2% in the same period.

Apart from upstream energy companies, higher crude oil prices also benefit 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 (CVX)

XLE offers 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% of its weight, with Exxon Mobil (XOM) and CVX alone constituting ~28%.

In the week ended September 4, XLE’s biggest losers included Ensco PLC (ESV) and Noble Energy (NBL), which fell ~11.83% and 11% respectively between August 28 and September 4, followed by Diamond Offshore Drilling (DO), which fell 9.4% in the same period. These companies together constitute ~2% of XLE.

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