Already among some of this year’s top-performing sector exchange traded funds, energy ETFs continues to add assets even as oil prices fall and global investors fret about the impact sanctions against Russia will have.
Energy ETFs added about $460.7 million in the past week, bring the group’s total assets gained since Dec. 31 to $6.77 billion, according to Bloomberg. No group of sector ETFs has added more new assets than energy funds in 2014.
Inflows to energy ETFs over the past week are impressive when accounting for the weakness in oil prices. The United States Oil Fund (NYSEArca: USO) is off 0.7% over that time while the United States Brent Oil Fund (NYSEArca: BNO) has tumbled 1.6%.
Earlier this week, the International Energy Agency said global oil demand will slip to its lowest since 2012. The agency cut its demand growth estimates this year and the next after annual expansion in fuel consumption dipped to 700,000 barrels per day in the second quarter, following a weaker global economic outlook by the International Monetary Fund. [Brent Oil ETFs Face Headwinds]
Slack oil demand has not kept investors from allocating capital to equity-based energy ETFs. Over the past week, the Energy Select Sector SPDR (NYSEArca: XLE), the largest energy ETF, has added over $229 million, bring its year-to-date asset haul to $2.63 billion, by far the best among sector ETFs. [Gushing Over Energy ETFs]
For the week ending Aug. 11, the Market Vectors Oil Service ETF (NYSEArca: OIH) added $109.2 million, though investors’ taste for oil services stocks could be tested against the backdrop of Western sanctions against Russia.
“The sanctions are placing some restrictions on the engagement of certain people and equipment in our Russian operations which in the short term will have an impact on operational efficiency and costs in Russia. The financial impact of the sanctions in the third quarter is limited, and is currently estimated to be up to $0.03 of earnings per share,” said Schlumberger in a statement issued Tuesday.
Schlumberger (NYSE: SLB), the world’s largest oil services provider, accounts for over 20% of OIH’s weight. [Russia Weighs on Oil Services ETFs]
Despite the unnerving backdrop provided by Russia, there are positive catalysts that could stoke further ebullience towards energy ETFs. XLE constituents including Exxon Mobil (NYSE: XOM) as well as some of the European majors found in the SPDR S&P International Energy Sector ETF (NYSEArca: IPW) are lining up to win exploration contracts in Mexico, which recently opened its energy industry to foreign investment. [ETFs for Mexico’s Energy Boom]
Investors have also been allocating cash to ETFs focusing on master limited partnerships (MLPs), a move that was rewarded earlier this week when Kinder Morgan Inc. (NYSE: KMI) said it will acquire Kinder Morgan Energy Partners, L.P. (NYSE: KMP), Kinder Morgan Management, LLC (NYSE: KMR) and El Paso Pipeline Partners (NYSE: EPB) in what amounts to the second-largest deal ever in the U.S. energy sector. [These ETFs Love the Kinder Morgan News]
The First Trust North American Energy Infrastructure Fund (NYSEArca: EMLP), ETRACS Alerian MLP Infrastructure Index ETN (NYSEArca: MLPI) and the Global X MLP & Energy Infrastructure ETF (NYSEArca: MLPX), each of which has solid exposure to companies involved in the Kinder Morgan deal, have added over $90 million in new assets since the start of the third quarter.
Energy Select Sector SPDR
