11 Mar

Energy Subsector Diverged from Oil Last Week

WRITTEN BY Rabindra Samanta

Energy sub-sector ETFs

In the week ending March 8, major energy subsector ETFs had the following performances:

  • The Alerian MLP ETF (AMLP) rose 0.1%.
  • The VanEck Vectors Oil Refiners ETF (CRAK) fell 1.6%.
  • The VanEck Vectors Oil Services ETF (OIH) fell 7.7%.
  • The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) fell 7.7%.

Energy Subsector Diverged from Oil Last Week

Energy subsector underperformed despite oil’s small rise

Last week, US crude oil futures rose 0.5%. However, most of the energy ETFs ended in the red. The S&P 500 Index (SPY) fell 2.2%, which might have dragged these energy ETFs. On March 1–8, other US equity indexes also fell. The S&P Mid-Cap 400 (IVOO) and the Dow Jones Industrial Average (DIA) fell 3.4% and 2.2%, respectively. These equity indexes have an exposure of 5.9%, 5.1%, and 5.2% to energy stocks, respectively.

However, the factors discussed in the previous part might support these energy ETFs this week, particularly CRAK. US downstream stocks account for ~30.1% of CRAK and are sensitive to the Brent-WTI spread.

Energy sector performance

Last week, US crude oil April futures rose 0.5%, while the Energy Select Sector SPDR ETF (XLE) fell 3.8%. XLE fell the most among the sector-specific SPDR ETFs under review despite oil’s small rise because of bearish sentiments in the broader market indexes.

Last week, the Utilities Select Sector SPDR ETF (XLU) rose 0.7%—the largest rise among the sector-specific SPDR ETFs. Most of the sector-specific SPDR ETFs closed in the red last week.

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

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