Higher Oil Prices Only May Not Be Sufficient for Energy ETFs

Energy subsector ETFs

From December 7–14, 2017, the correlations of our list of energy subsector ETFs with US crude oil January 2018 futures are as follows:

  • SPDR S&P Oil & Gas Exploration & Production ETF (XOP): 80.5%
  • Energy Select Sector SPDR ETF (XLE): 67.9%
  • VanEck Vectors Oil Services ETF (OIH): 43.6%
  • Alerian MLP ETF (AMLP): 10.5%

Higher Oil Prices Only May Not Be Sufficient for Energy ETFs

XOP fell 0.9%, while AMLP rose 4.5%, the most on our list over this time period. XLE and OIH rose 0.9% and 0.1%, respectively. US crude oil January futures rose 0.6% in the trailing week.

Natural gas

From December 7–14, 2017, XOP, XLE, AMLP, and OIH had correlations of 63.9%, 55.5%, 29.9%, and 19.2%, respectively, with natural gas January futures. In this period, natural gas futures fell 2.9%. The fall may have impacted XOP to a large extent, causing it to close in the red over this period.

Broader market

In the seven days to December 14, 2017, OIH, XLE, XOP, and AMLP had correlations of 87.7%, 85.6%, 73.8%, and 8%, respectively, with the S&P 500 Index (SPY). SPY rose 0.6% over this period.

So OIH and XLE seem to have been impacted more by the movement in the broader market than by oil prices, according to the magnitude of the correlations above.