The Energy Select Sector SPDR (NYSEArca: XLE) and the iShares Global Energy ETF (NYSEArca: IXC) are each down more than 11% over the past month as oil equities have continually followed the commodity lower.
Still, some investors are eagerly search for a bottom in the energy sector and looking for any sign that capitulation has arrived. That could be a sign that even with crude futures residing well-below breakeven levels for many producers, energy stocks might not be far from capitulation. oil experts project crude prices will continue to dip to levels where many shale producers will be unable to generate a profit, reports Patti Domm for CNBC.
According to a recent CNBC oil survey, the majority of investors and analysts believe WTI will slide to between $30 and $40 per barrel this fall, with about 62% of respondents anticipating the WTI crude to trade between the range and stay low toward the end of the year,
Additionally, 43% of respondents believe the breakeven price for the U.S. shale industry is about $45 to $55 per barrel, and 24% estimate the breakeven level at $55 to $65. [Breakeven Becomes an Oil Headwind]
Although it seems counter-intuitive, a lack of institutional support for energy stocks could be another sign sellers are growing tired.
On Monday, CNBC reported that among the 20 most widely held stocks by institutional investors in the second quarter, just two were energy stocks, Royal Dutch Shell (NYSE: RDS-A) and Chevron (NYSE: CVX). That is down from three in the first quarter when Exxon Mobil (NYSE: XOM) was also on the list.
“The percentage of institutional funds that owned Chevron dropped 40 basis points during the quarter, down to 12.53 percent from 12.93 percent. But the recent shift away from the energy stocks begs the question of whether they were oversold,” notes CNBC.
One of the factors energy ETFs like XLE and IXC is that some professional investors are short the ETFs’ holdings. For example, earlier this year, noted short seller Jim Chanos, president and founder of Kynikos Associates, said he is short oil giants Royal Dutch Shell (NYSE: RDS-A) and Dow component Chevron (NYSE: CVX).
iShares Global Energy ETF
