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Rise in Oil Pushed Energy ETFs Higher

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Updated

Correlation with US crude oil

On June 13–20, major energy ETFs had the following correlations with US crude oil active futures:

  • the Energy Select Sector SPDR ETF (XLE): 78%
  • the Alerian MLP ETF (AMLP): 68.6%
  • the SPDR S&P Oil & Gas Exploration & Production ETF (XOP): 65.3%
  • the VanEck Vectors Oil Services ETF (OIH): 54.4%

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US crude oil active futures have risen 8.6% in the trailing week, which might have boosted or limited the downside in OIH, XOP, XLE, and AMLP. They have returned 5.8%, 5%, 3.7%, and -0.7%, respectively. Tension in the Middle East has boosted the energy portfolio.

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Natural gas

In the trailing week, AMLP, OIH, XLE, and XOP had negative correlations with natural gas active futures of 96.2%, 85.1%, 82.7%, and 79.5%, respectively. Natural gas active futures have fallen 6.7%. Based on the correlations, these energy ETFs might have moved inversely to natural gas prices.

Equity markets

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

  • AMLP: 91.7%
  • XLE: 88.1%
  • OIH: 80.6%
  • XOP: 79.6%

The S&P 500 (SPY) has risen 2.2% during the last week. These correlations and returns suggest that broader markets have played a significant role in these energy ETFs’ upside. In fact, these energy ETFs had a higher correlation with the S&P 500 Index than oil prices.

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