5 Apr

What Boosted Oil This Week?

WRITTEN BY Rabindra Samanta

US equity indexes

In the trailing week, US equity indexes had the following correlations with US crude oil active futures:

  • the S&P 500 (SPY): 62.8%
  • the Dow Jones Industrial Average (DIA): 30.7%
  • the S&P Mid-Cap 400 (IVOO): 18.8%

What Boosted Oil This Week?

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These three equity indexes have exposure of ~5.4%, ~5.4%, and 3.7% to the energy sector, respectively. The equity indexes have risen 2.3%, 2.6%, and 2.4%, respectively, between March 28 and April 4. US crude oil active futures rose 4.7% during this period.

Oil’s rise and equity indexes

The correlations indicate a positive relationship between oil and most of these US equity indexes. In recent months, movements in the broader market have dominated oil prices. Apart from the broader market, the fall in US oil production is another important reason for oil’s rise.

In the trailing week, the Energy Select Sector SPDR ETF (XLE) has risen 0.3%. XLE was the second-smallest gainer among the SPDR ETFs that break the broad market into subsectors. A fall of 2.5% in natural gas in the trailing week might have capped XLE’s upside.

The Consumer Staples Select Sector SPDR Fund (XLP) has fallen 0.6% and has underperformed the SPDR ETFs in the trailing week. During this period, the Materials Select Sector SPDR Fund (XLB) rose 5.1% and was the top gainer among sector-based SPDR ETFs. Most of the SPDR ETFs ended in the green.

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