Trump’s energy policy
President-elect Donald Trump’s energy policy could impact the fundamentals of energy fossil fuels. Trump’s stance on increasing crude oil and natural gas output could enhance the current supply glut situation. It could also lead to higher job creation in the United States (VFINX) (SPY).
Higher crude oil and natural gas production could increase the overall revenues of oil and gas companies operating in the United States.
Energy ETFs and crude oil after the Trump win
On November 9, 2016, after Trump’s victory, both crude oil and energy stocks recovered, along with the broader markets. US crude oil (USO) (USL) (UWTI) active futures rose 0.60%. The Energy Select Sector SPDR ETF (XLE) and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) rose 1.6% and 4.3%, respectively.
However, in the following trading sessions, energy stocks started to outperform crude oil. For the week ended November 11, 2016, the Energy Select Sector SPDR ETF (XLE) and XOP rose 2.5% and 5.0%, respectively, while US crude oil fell 1.5%. The outperformance of energy stocks could be correlated to broader market performance and Trump’s aggressive energy policy.
The fall in crude oil prices could be correlated to the market belief that Trump’s energy policy and OPEC’s (Organization of the Petroleum Exporting Countries) record production could further enhance oil oversupply.
To find out more, read Sector Rotation and Inflation Play Big Roles after Trump’s Win.