Correlation with US crude oil

On April 10–17, major energy ETFs had the following correlations with US crude oil active futures:

  • the VanEck Vectors Oil Services ETF (OIH): 74.5%
  • the SPDR S&P Oil & Gas Exploration & Production ETF (XOP): 72.5%
  • the Energy Select Sector SPDR ETF (XLE): 66.1%
  • the Alerian MLP ETF (AMLP): -34.8%

Earnings Sentiments Might Be Influencing Energy ETFs

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US crude oil active futures fell 1.2% in the trailing week. These ETFs have returned 1.3%, 0.9%, 0.3%, and -0.4%, respectively. These energy ETFs’ returns are in the same order as their descending order of correlations with oil. However, all of these energy ETFs outperformed oil prices.

Natural gas

In the trailing week, XLE, XOP, OIH, and AMLP had correlations with natural gas active futures of 86.3%, 80%, 46.3%, and 33%, respectively. Natural gas active futures fell 6.8% during the same period.

Equity markets

Energy ETFs had the following correlations with the S&P 500 Index in the trailing week:

  • XOP: 89%
  • AMLP: 70.8%
  • XLE: 35.4%
  • OIH: -4.4%

The S&P 500 Index (SPY) rose 0.4% during this period. Given these correlations, the broader market might have supported the upside in some of these Energy ETFs. Usually, the sentiments in the broader market are more important to energy ETFs than oil prices. Apart from the broader market, earnings expectations around energy stocks might have helped most of these energy ETFs overcome weakness in oil and natural gas. On April 17, natural gas settled at $2.51 per MMBtu (million British thermal units)—the lowest closing level for active natural gas futures since June 8, 2016.

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