How Falling Oil Prices Impacted XLE’s Performance



Energy sector versus the broader market

From August 25 to September 1, 2016, the Energy Select Sector SPDR ETF (XLE) fell by 1.9%. It was the second-highest fall among the SPDR ETFs that we’re covering in this part of the series.

US crude oil (UWTI) (USO) (OIIL) (USL) (SCO) (DWTI) October futures fell by ~8.8% from August 25 to September 1, 2016, due to the various factors we discussed earlier in this series. This is what primarily fueled the fall in XLE.

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Among the SPDR ETFs, the Financial Select Sector SPDR ETF (XLF) rose the most. It rose by ~1.6% from August 25 to September 1. Market participants are expecting a rate hike at the Fed’s meeting between September 20 and September 21, 2016. This might be supporting XLF.

The above table shows XLE’s performance compared to ETFs representing other sectors. The returns of the ETFs in the above table are adjusted for dividends.

Crude oil this week

On September 2, 2016, at 1:52 AM EST, US crude oil was trading at $43.40 per barrel. That’s a fall of ~9.4% compared to its closing price on August 26, 2016. Crude oil will likely close on a negative note this week. From August 19 to August 26, crude oil rose by 3%.

The potential of a reversal in crude oil prices is an important factor for ETFs such as the iShares US Oil Equipment & Services (IEZ), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), and the Guggenheim S&P 500 Equal Weight Energy ETF (RYE).

In the final part of this series, let’s see how crude oil and natural gas drive energy ETFs.


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