Energy ETFs: What Has Limited the Upside in Q1?



Correlation with US crude oil

So far in the first quarter, major energy ETFs had the following correlations with US crude oil active futures:

  • the VanEck Vectors Oil Services ETF (OIH): 68.2%
  • the Alerian MLP ETF (AMLP): 67.7%
  • the Energy Select Sector SPDR ETF (XLE): 65.7%
  • the SPDR S&P Oil & Gas Exploration & Production ETF (XOP): 64.1%

US crude oil active futures have risen 30.6% in the first quarter. In fact, US crude oil’s price performance in the first quarter is turning out to be the best performance since 2009. OIH, XOP, XLE, and AMLP have risen 23%, 16.1%, 15.5%, and 14.4%, respectively. The rise in oil prices might have boosted these energy ETFs. OIH had the highest correlation with oil and outperformed other energy ETFs.

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Natural gas

So far in the first quarter, AMLP, XLE, OIH, and XOP had correlations with natural gas active futures of 21.9%, 30.3%, 34.5%, and 34.7%, respectively. Natural gas active futures fell 7.8%. The fall in natural gas might have capped the upside in these energy ETFs.

Equity markets

Energy ETFs had the following correlations with the S&P 500 Index in the first quarter:

  • XLE: 69.9%
  • XOP: 60.4%
  • OIH: 49.1%
  • AMLP: 45.3%

The S&P 500 Index (SPY) rose 12.3% during this period. Given these correlations, the broader market might have impacted these ETFs. Usually, the sentiments in the broader market are more important to energy ETFs than oil prices.


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