Even though Crude Oil prices are within shouting distance of their highest levels since the beginning of May this morning, Energy equity ETFs have largely been lagging in recent sessions. For example, the largest product in the category XLE (SPDR Energy Select, Expense Ratio 0.15%) has suffered recently, falling below its 50 day MA and staying there, with the fund seeing a notable $650 million flow out in the trailing one month period.

Similarly, related ETF VDE’s (Vanguard Energy, Expense Ratio 0.12%) chart looks very similar to XLE, but the fund has had flattish asset flows for the past month. Another notable in the category, IYE (iShares U.S. Energy, Expense Ratio 0.43%) is also in the doldrums lately, seeing about $550 million leave the fund via redemption flows in the trailing one month period.

Year to date we see small gains in Crude Oil prices at least when measured by the largest Oil tracking (but far from perfect) ETF, USO (United States Oil Fund, Expense Ratio 0.45%) but XLE for example is now down over 1% year to date significantly trailing the broader market SPX performance during this time frame. Even more notably is the trailing one month performance, where Energy stocks simply have not kept pace with Crude Oil prices, with XLE down about 5.5% during this time frame with Crude Oil prices marginally up in the same time frame.

Typically, Crude Oil prices and Energy stocks do not display such a negative correlation as they have in the recent short term, and this action has caused us to examine the phenomenon further. Top holdings in XLE are XOM (>15%), CVX (13%), and SLB (>7.6%), and when looking at individual charts in the stocks, it is clear they are simply not participating lately and trading at their lowest levels largely since March.

When looking for potential catalysts for the names, corporate earnings season is still a ways off for example, as XOM is not slated to report until 7/30, CVX on 7/31, and SLB on 7/16. In the meantime, we do at times see yield players flocking to Energy names given the yields available here, and XOM’s dividend yield for example has climbed to 3.40%, and CVX 4.20% for example, so it will be interesting to see if there is any lift in the sector if value players enter the equation at any point in the near future.

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