A Possible Problem for Energy ETFs


Oil majors have tightened their belts, reducing costs by laying off thousands of workers and halted many new projects. Large integrated oil companies are expected to hold up better than drilling stocks as these giants have both upstream exploration and production, along with downstream refining operations.

In terms of output, the problem is many oil-producing nations need the revenue, even if it comes by way of depressed prices.

“OPEC members are not the only ones who need oil revenue. Russia also has high fiscal commitments and may need to increase fiscal outlays ahead of the presidential election in 2018. Russia’s oil sector, however, has the added benefit of a weakening currency. This is not a luxury the Gulf Cooperation Council (GCC) countries have since they are committed to maintaining their currency peg to the U.S. Dollar,” according to Investopedia.

Energy Select Sector SPDR