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How Oil’s Fall Has Impacted Energy ETFs

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Sep. 7 2018, Updated 10:27 a.m. ET

Correlation with US crude oil

Between August 30 and September 6, 2018, the major energy ETFs had the following correlations with US crude oil October futures:

  • the VanEck Vectors Oil Services ETF (OIH): 63.2%
  • the Energy Select Sector SPDR ETF (XLE): 32.2%
  • the SPDR S&P Oil & Gas Exploration & Production ETF (XOP): 24.6%
  • the Alerian MLP ETF (AMLP): 23.4%
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Correlation between US crude oil and energy ETFs

US crude oil October futures have fallen 3.5% in the trailing week. OIH, XOP, XLE, and AMLP fell 6.3%, 5.3%, 2.9% and 0.3%, respectively, during this period. OIH had the highest correlation with oil prices and underperformed our list of energy ETFs.

Natural gas

Between August 30 and September 6, 2018, XOP, OIH, XLE, and AMLP had correlations with natural gas October futures of 15.6%, 35.4%, -31.6%, and -54.5%, respectively. Natural gas October futures fell 3.5% during this period. Most of these energy ETFs likely moved inversely to natural gas prices in the past four trading sessions, according to the correlations.

Equity markets

Energy ETFs had the following correlations with the S&P 500 Index in the past four trading sessions:

  • XOP: 67.6%
  • OIH: 66.2%
  • XLE: 37.5%
  • AMLP: 9%

The S&P 500 Index (SPY) has fallen 0.8% in the past four trading sessions. XOP had a relatively high correlation with the S&P 500 Index compared to oil prices. The fall in the broader market might have also dragged upstream energy stocks.

Next, we’ll discuss oil’s correlation with the S&P 500 Index.

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