Energy ETFs Could Be More Aligned to Equity Markets than Oil

On February 15–22, 2018, energy subsector ETFs’ correlations with US crude oil April futures were:

• the VanEck Vectors Oil Services ETF (OIH) at 58.2%
• the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) at 10.3%
• the Energy Select Sector SPDR ETF (XLE) at -21.4%
• the Alerian MLP ETF (AMLP) at -84.9%

In the trailing week, OIH rose 0.5%—the only energy ETF on our list that closed in the green. US crude oil futures rose 2.6% during this period. Other energy ETFs like XOP, XLE, and AMLP fell 1.1%, 1.4%, and 4%, respectively, in the past four trading sessions.

On February 15–22, 2018, our list of energy ETFs’ correlations with natural gas April futures were:

• XLE at -82.6%
• XOP at -65.9%
• OIH at -54.2%
• AMLP at -53.2%

During this period, natural gas April futures rose 2.1%.

In the trailing week, these four energy ETFs’ correlations with the S&P 500 Index were:

• XLE at 84.6%
• AMLP at 80.9%
• XOP at 61.7%
• OIH at 28.4%

In fact, XLE, AMLP, and XOP closed in the red, which coincided with the 1% fall in the S&P 500 Index in the trailing week. Based on the correlations, these three ETFs might have moved more with the broader market than oil during this period. Oil prices might be a bigger factor for OIH.