Market Overview

Oil ETFs: Sector's Slick Slope Might Be Ending

Oil ETFs: Sector's Slick Slope Might Be Ending

To say the energy space has been volatile this year may be a colossal understatement. Crude oil, natural gas and energy-related stocks have experienced wild swings in both directions that include setting new 52-week lows. 

This choppy price action has led to speculative trading and overwhelming indecision about the direction of the market. Nevertheless, crude oil appears to be challenging its naysayers by pressing to new one-month highs this week.

United States Oil Fund LP ETF

The United States Oil Fund LP (ETF) (NYSE: USO) is the most well-known and widely traded ETF that tracks the daily price movement of West Texas Intermediate Crude Oil futures. After hitting a low in mid-March, USO has been steadily gaining momentum, despite weekly energy stockpile gains that would traditionally hamper prices.


Related Link: Goldman Sachs: Be Prepared For The Next Phase Of The Oil Slump

The U.S. Energy Information Administration also recently released its monthly forecast, which included a projected increase in 2015 and 2016 global demand.

Since March 17, USO has gained nearly 20 percent and has now crested back above its 50-day moving average in the most convincing move of the year. In addition, this ETF has gained more than $1.7 billion in new assets so far in 2015.

Not surprisingly, volume on USO has surged to an average of 34 million shares over the last three months. That represents a significant increase in daily trading activity year-over-year.

Energy Select SEctor SPDR ETF

The recent move higher in crude prices has also buoyed the 41 large, integrated oil companies that are represented by the Energy Select Sector SPDR (ETF) (NYSE: XLE). The mega-cap Exxon Mobil Corporation (NYSE: XOM) and Chevron Corporation (NYSE: CVX) account for just over 28 percent of the total asset allocation within XLE.

This ETF has managed to keep a steadier pace with less volatility than crude oil futures and is now trading in positive territory for the year.

SPDR S&P Oil & Gas Equipment & Services ETF

One industry ETF that could certainly use a boost is the SPDR S&P Oil & Gas Equipt & Servs. (ETF) (NYSE: XES). This fund tracks 47 smaller energy stocks engaged in complementary services to larger oil companies.

XES has declined more than 50 percent over the last year, yet has begun to retrace some of those losses in recent weeks. Continued bullish price action for oil would likely act as a tailwind for many of the beaten-down companies within the energy sector that are more susceptible to these cyclical forces.

Image Credit: Public Domain

Posted-In: US Energy Information Administration West Texas Intermediate Crude OilSector ETFs Commodities Trading Ideas ETFs Best of Benzinga


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