Three large energy ETFs have been moving in near lockstep for the past 12 months, posting gains of more than 40%. The Energy Select Sector SPDR (NYSE: XLE), the iShares Dow Jones US Energy (NYSE: IYE), and the Vanguard Energy ETF (NYSE: VDE) track one another nearly exactly. The
iShares S&P Global Energy ETF (NYSE: IXC) has also posted a gain over the past year, but the gain is nearer 30%. The main difference between IXC and the others is IXC’s exposure to global producers whereas the others focus exclusively on US stocks.

The Energy Select Sector SPDR (NYSE: XLE) posted a gain of more than 44% in the past year, and has gained nearly another 13% this year. The last three months have seen a negative move in the fund as the price of crude has retreated amid worries over a possible US debt default. Shares are trading about 1.67% higher in the pre-market this morning, at $76.45, in a 52-week range of %50.33-$80.97.

The iShares Dow Jones US Energy (NYSE: IYE) has returned a gain of nearly 43% in the past 12 months and year-to-date gain of 12.61%. Like XLE, the past three months have been negative. Shares closed down about -1% on Friday, at $43.60, in a 52-week range of $29.12-$46.12.

The Vanguard Energy ETF (NYSE: VDE) gained more than 44% over the past year, and its year-to-date gain is 12.66%. The last three months have been negative for VDE as well. Shares closed down nearly -1% on Friday, at $112.29, in a 52-week range of $73.85-$118.43.

The iShares S&P Global Energy ETF (NYSE: IXC) has posted a one-year gain of around 32% with a year-to-date gain of 7.82%. Shares have lost more than -7% in the past three months. Shares closed down nearly -1% on Friday, at $41.65, in a 52-week range of $30.00-$45.61.

The global nature of IXC, which includes holdings in BP, Total, Shell, and Petrobras among others, is the difference between this fund and the others and is very likely the main contributing cause to IXC’s inability to match the returns of the other funds. Exxon and Chevron are common to all the funds and each has staggered in the past three months. As have Shell and Total, which is down nearly -10%. Italy’s Eni is off nearly -14% and Canada’s Suncor is down nearly -16% over the past three months.

All the negativity on the integrated and E&P stocks is due to production declines even while prices remain high. European stocks have more exposure to production disruptions from Libya, and BP is still trying to recover from last year’s Gulf of Mexico disaster. While it makes sense to assume that the foreign producers will do better as prices rise, that is only interesting to investors if production declines can be reversed.

Right now, declines to larger European oil & gas companies could be irreversible until the situation in Libya is resolved. Eni, and to a lesser degree, Total need to Libyan oil to come back. Political stability in North Africa would also help. These results will have a positive impact on the outlook for some of the larger holdings of IXC and are worth keeping a watch for.

Paul Ausick

The reason is tied to Iraq, although not really the U.S. campaign there.  This is due to more tensions between Turkey and Iraq.  The Turkish government is apparently seeking parliamentary approval for a military operation against Kurdish rebels operating in northern Iraq.  MF Global also issued an alert today with the call that oil could see $100 per barrel by the end of 2007. Another analyst from Doha Bank has called for $100 oil in the coming months.  Xinhua recently had an article calling for $100 oil based upon Chinese oil imports rising.

We have even covered on our own how Dubai is going to get to end up owning much more than just a part of the NASDAQ if oil prices go over $90.00 like we think is easily possible.  Imagine that these high prices now are actually with no major net delivery miss here having happened.

Exxon Mobil (NYSE:XOM) is seeing shares up 1.3% at $94.70, less than 0.5% away from the $95.07 all-time high.  This has a large percentage of the iShares Dow Jones US Energy (NYSE:IYE) and this briefly hit a new high today.  Schlumberger (NYSE:SLB) is also up 1.3% at $111.25 today, and it briefly hit all-time highs this morning.  That stock is the largest in the Oil Services HOLDRs (AMEX:OIH), which are up 0.5% at $201.25 and also flirted with new highs today.

The Kurdish region is Turkey has been seeking independence from Turkey for most of the last century (and probably under regional control for far longer).  We will spare the diplomatic explanation because it is long and complicated, but in summary Turkey doesn’t want to give up the region and let it become independent AND it doesn’t want the Kurds in Iraq to become its own region because it would in theory give the Turkish Kurds a bit more of a leg to stand on. 

PetroChina (NYSE:PTR) has surpassed GE to be the second largest company by market cap.
T. Boone Pickens was still bullish with his last forecast, although he did not offer any formal price targets.
Recently Goldman Sachs issued a higher "Super-Spike" target noting oil could hit $135/barrel and $4.50/gallon.
Anadarko up over 2% after filing for its MLP to come public.
Valero rose recently even on an earnings warning.
Ken Heebner is still quite bullish on black gold as well.
Superior’s battered IPO is up 2% from our October 4 article, but something still doesn’t seem right there.

Jon C. Ogg
October 15, 2007

Jon Ogg produces the Special Situation Investing Newsletter for 247wallst.com; he does not own securities in the companies he covers.  If you think oil mergers and spin-offs will continue, this is where you’ll get more proprietary data.