Energy Subsector Is Diverging from Oil’s Rise



Energy ETFs

Last week, major energy subsector ETFs had the following performances:

  • The VanEck Vectors Oil Refiners ETF (CRAK) rose 0.3%.
  • The Alerian MLP ETF (AMLP) fell 0.7%.
  • The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) fell 1.2%.
  • The VanEck Vectors Oil Services ETF (OIH) fell 1.5%.

A higher Brent-WTI spread, which we discussed in the previous part, might have supported CRAK. US downstream stocks account for ~30.1% of CRAK. However, a 2.3% and 3.1% rise in US crude and natural gas prices didn’t support these energy ETFs. The earnings results might have kept the energy sector isolated from the US-China trade talk optimism, which we discussed in the previous part.

On February 15–22, US equity indexes rose. The S&P Mid-Cap 400 (IVOO), the Dow Jones Industrial Average (DIA), and the S&P 500 Index (SPY) rose 1%, 0.6%, and 0.6%, respectively. These equity indexes have an exposure of 5.1%, 5.2%, and 5.9% to energy stocks, respectively.

Oil, the broader market, and energy ETFs

Last week, US crude oil April futures rose 2.3%, while the Energy Select Sector SPDR ETF (XLE) fell 0.5%. XLE fell the most among the sector-specific SPDR ETFs under review. Oil’s rise and increased bullishness in the broader market indexes didn’t bring XLE’s return into the positive territory.

Last week, the Utilities Select Sector SPDR ETF (XLU) rose 2.4%—the largest gainer among the sector-specific SPDR ETFs. Most of the sector-specific SPDR ETFs closed in the green last week.

Next, we’ll discuss the top energy gains last week.

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