Institutional Interest Keeping Energy Stocks and ETFs Higher as Oil Challenges $60
Just when it looked as if crude oil prices were going to pull back, suddenly a one-day surge higher of 2.4% ($1.40) has taken oil back above $60 per barrel. With each barrel of West Texas Intermediate crude hitting $60.22, this is allowing oil to yet again challenge highs going back to November 2018 when oil was in free fall.
While the OPEC export cuts are keeping supplies tighter than normal, the lack of exports from Venezuela also is taking a toll, even as U.S. exports may run at all-time highs. The move also precedes the weekly EIA oil inventory data due this afternoon.
One additional driver is that institutional investors finally have started to rotate back into energy in recently. Some funds had been exiting fossil fuels and others had avoided them until valuations went far under historic norms. Even earlier in March, short sellers (mostly institutions) had mostly seen decreased short positions as the share prices were rising.
Crude oil has been a boom and a bust for energy stocks. Oil has risen from $46 per barrel at the end of 2018 to over $60 per barrel on last look. It was also up at $75 at the start of last October, before the market meltdown hurt every equity.
The gains have been massive in the top exchange traded funds and leadership stocks year to date as the institutions have bought shares. We have run performance screens using Finviz, and the gains do include dividends, if the dividends have been paid.
Year-to-date gains are 14% in the Energy Select Sector SPDR ETF (NYSEARCA: XLE). And despite the outperformance of 2019, it is still down about 2.5% from a year ago. This is the largest of the major oil and gas ETF. With shares at $66.59 on Tuesday, it has a 52-week trading range of $53.36 to $79.42. Over the past five years, it has a broader range of just under $56 to a high of $100.
The ProShares Ultra Oil & Gas (NYSEARCA: DIG) ETF was up 3.3% at $31.35 on Tuesday, up a sharp 30% so far in 2019 alone, and that’s still down almost 10% from a year ago.
In the oilfield services sector, there is the VanEck Vectors Oil Services ETF (NYSEARCA: OIH). Its shares were up almost 2% at $17.23 on Tuesday, and that’s still down about 2% from last week. Its new multiyear low during the selling carnage went down to $13.13, and that is down from a 52-week high of $29.87. This fund is up 20.5% so far in 2019 but it is down about 30% from this time a year ago.
The Alerian MLP ETF (NYSEARCA: AMLP) is the largest of the ETFs tracking master limited partnerships (MLPs), and it is up 14% so far in 2019. But that’s up only about 6% from this time a year ago. Trading 1% higher at $10.06 on Tuesday, this was marginally higher last week, and the 52-week range is $8.27 to $11.41. Its last dividend gave it a current 7.7% dividend yield, but that payout changes as the underlying MLPs see payout changes.
The InfraCap MLP ETF (NYSEARCA: AMZA) is a smaller ETF tracking MLPs, and its shares were last seen up 1.1% at $5.99, in a 52-week range of $4.71 to $8.18. This ETF is still down by 15% from this time a year ago.
The Vanguard Energy ETF (NYSEARCA: VDE) was seen up 1.7% at $89.88 on Tuesday, and its gain of 14.6% so far in 2019 pales against a 4% loss from this time a year ago.
The SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARCA: XOP) was last seen up 2.3% at $30.77 on Tuesday. That is up almost 14% so far in 2019, and it is down by 13% from a year ago.
And the iShares Global Energy ETF (NYSEARCA: IXC) was last seen up 14% so far in 2019, and it is basically flat compared with a year ago.
To look at the major movers inside the top energy ETFs and funds, here are the year-to-date gains seen by some of the top energy sector leaders:
- Baker Hughes: 27%
- Chesapeake Energy: 48%
- Chevron: 13%
- Exxon: 17%
- Hess: 47%
- Occidental: 6%
- Schlumberger: 18%
- Kinder Morgan: 31%
- Enterprise Products: 18%
24/7 Wall St. would remind investors that it can be a painful game just chasing performance for the sake of chasing today’s and yesterday’s winners. That said, momentum investors have done well here, and the institutional buying may not abate if energy prices keep heading higher. These gains are happening while the commodity is at the highest price since last November.