Are Energy ETFs Matching Oil’s Second Weekly Gain?


Nov. 20 2020, Updated 10:39 a.m. ET

US crude oil prices

On April 6, 2017, US crude oil (DBO) (OIIL) (USL) (SCO) futures contracts for May delivery closed at $51.70 per barrel—an ~1.1% rise over the previous trading session.

US crude oil inventories reached a record of ~535.5 MMbbls (million barrels) in the week ending March 31, 2017, according to EIA (U.S. Energy Information Administration) data released on April 5, 2017. However, motor gasoline inventories fell by 0.6 MMbbls and US refineries operated at 90.8% capacity for the week ending March 31, 2017—compared to 89.3% the previous week. These factors contributed gains in crude oil prices.

In the last five trading sessions, WTI crude oil May futures traded between $48.38 and $51.82 per barrel. From March 30 to April 6, 2017, US crude oil futures contracts for May rose 2.7%.

During the same period, the S&P 500 Index (SPY) (IVV) (VNN) (SPX-INDEX) fell 0.4% and the Dow Jones Industrial Average Index (DIA) (DJIA-INDEX) fell 0.2%. Energy accounts for 6.6% of the S&P 500 Index and 6.4% of the Dow Jones Industrial Average Index.

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The S&P 400 Midcap 400 Index (IVOO) (MID-INDEX), which has 3.4% exposure to the energy sector, fell ~0.6% during this period. The FTSE 100 Index (UKX-INDEX) (EWU) fell 0.9%, while the CAC 40 Index (PX1-INDEX) (EWQ) rose 0.6% during this period. Oil and gas companies account for 14.1% of the FTSE 100 Index and 11.6% of the CAC 40 Index. Movements in crude oil can drive broader equity markets.

Crude oil this week

On April 7, 2017, at 2:13 AM EST, US crude oil (OIIL) May futures were trading at $52.34 per barrel—a rise of 3.4% compared to the closing price on March 31, 2017. Reports of US missile strikes on Syria drove prices above $52. Crude oil prices are impacted by geopolitical tension. Crude oil will likely close with strong gains this week as well. Between March 24 and March 31, 2017, crude oil rose 5.5%.

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Natural gas prices

Natural gas (UNG) May futures rose 4.4% from March 30, 2017, to April 6, 2017. On April 6, 2017, natural gas active futures rose 2% and closed at $3.33 per MMBtu (million British thermal units)—the highest closing price since January 30, 2017. On April 6, the EIA announced natural gas inventory data for the week ending March 31, 2017. We’ll discuss natural gas inventory data in Part 3 of this series. Active natural gas futures closed above $3.3 for the first time in 48 trading sessions.

Earlier in the week, the expectation of tightening in the supply-demand situation contributed to a rise in natural gas prices.

Performances of energy ETFs

Here’s how some energy ETFs performed between March 30 and April 6, 2017:

  • The Energy Select Sector SPDR ETF (XLE) rose 0.7%.
  • The Alerian MLP ETF (AMLP) rose 1.4%.
  • The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) rose 1.3%.
  • The VanEck Vectors Oil Services ETF (OIH) rose 1.3%.

Understanding ETF performances

In the following parts of this series, we’ll look at what drove the performances of the previously mentioned energy ETFs as well as others. First, let’s take a look at the performance of the United States Oil ETF (USO).


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