The United States Oil Fund (NYSEArca: USO) plunged 14% in November, hitting a steady series of 52-week lows, but oil’s woes were not enough to keep investors from putting new capital to work with energy exchange traded funds.
Despite an array of dismal performances by futures-based energy ETFs, including USO, those funds captured $312 million “their second-highest monthly inflows of the year, as investors bet OPEC would cut oil production and thereby trigger a rebound in the oil price,” reports Claire Milhench for Reuters.
The bulk of those inflows were directed to USO, which added nearly $297 million in new assets last month. However, there is a caveat. USO’s assets under management total has a penchant for rising when oil prices slide, a sign that some traders are opting to short that ETF rather than buying inverse equivalents. [Energy ETFs Keep Gaining Cash]
Investors also stuck with equity-based energy ETFs last month. In November, those funds added “$1.3 billion, the highest inflows of all the U.S. equity sector ETPs. Globally, they have gathered $9.2 billion year-to-date,” according to Reuters. That group includes the Energy Select Sector SPDR (NYSEArca: XLE), the largest energy sector ETF, and the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEArca: XOP).
XLE’s November inflows were nearly $280 million while the more volatile, equal-weight XOP added $155.6 million. That despite XLE tumbling 7.2% and XOP lagging even USO with a November drop of 14.3%. XLE, which is historically the second-best of the nine sector SPDRs in the month of December, is the only one of those nine ETFs to be in the red on a year-to-date basis with a 2014 loss of 8%.
Investors have extended their affinity for XLE, adding $756 million to the ETF this month, making the fund the top asset gatherer among all ETFs through the first week of December. With share prices depressed, analyst now see value in the energy patch. AltaVista Research, which researches close to 900 ETFs, has an overweight rating on XLE, making the goliath energy fund the only one of the nine sector SPDRs AltaVista currently rates as overweight.
“Profit expectations have been deteriorating rapidly as oil prices have fallen, and OPEC’s recent decision to maintain production levels is confirmation that larger supplies from America’s shale oil & gas revolution means lower energy prices–great for consumers but a threat to the long-term profitability of Energy firms. The Energy sector appears attractive in terms of valuation, but momentum isn’t currently in the sector’s favor,” said AltaVista in a note out earlier this month. [Bold Call on a Big Energy ETF]
Energy Select Sector SPDR
