Additionally, the international outrage over Saudi Arabia’s execution of a Shi’ite cleric ended speculation that Organization of Petroleum Exporting Countries could come together on a production cut, reports Simon Falush for Reuters. [Oil ETF Bears Continue Aggressive Forecasts ]
If oil prices falls to new lows and the shale industry is unable to turn a profit, the highly leveraged industry may find it harder to repay debt obligations. With the U.S. dollar strengthening and the Federal Reserve looking at tightening its monetary policy, the various U.S. market sectors and related exchange traded funds could behave differently in a strong USD environment.
“Short interest for energy is at the third-highest level of any sector dating back to 2007 just before the crisis unfolded. Consumer discretionary shares hit 18 percent, also in July 2008,” according to CNBC. “Drillers have been hit especially hard, falling nearly 20 percent in 2016 and about 40 percent over the past year. The top-performing company year to date in the sector has been Spectra Energy, which has gained more than 22 percent. There are only eight stocks in the sector that are positive this year.”
Energy Select Sector SPDR