Oil and gas services-related exchange traded funds were leading the energy sector rally Tuesday, with Transocean (NYSE: RIG) shares surging, as a weak dollar and a Kuwait strike prop up crude oil prices.
On Tuesday, the SPDR Oil & Gas Equipment & Services ETF (NYSEArca: XES) advanced 4.4%, Market Vectors Oil Service ETF (NYSEArca: OIH) gained 3.7% and PowerShares Dyanmic Oil and Gas Service ETF (NYSEArca: PXJ) rose 3.6%. The three oil & gas equipment & services related ETFs also broke above the resistance at their respective 200-day simple moving averages.
The oil services sector was rallying, with RIG jumping 10.1%. Transocean shares were strengthening on positive earnings revisions for the quarter and year.
Additionally, Diamond Offshore Drilling (NYSE: DO) also jumped 5.7% on Tuesday.
XES includes a 3.7% tilt toward DO and 3.2% in RIG. OIH holds 3.2% RIG and 2.0% DO. PXJ includes 2.6% RIG and 2.6% DO.
Meanwhile, the broader Energy Select Sector SPDR (NYSEArca: XLE) was up 1.6% Tuesday. XLE has a 16.8% weight in the energy equipment & services sub-sector.
The oil equipment and services industry is also beginning to outperform the broader energy sector. Over the past three months, XES was up 24.7%, OIH increased 23.0% and PXJ returned 24.7% while XLE was 19.7% higher.
The energy sector was among the better performing areas of the market Tuesday as a depreciating U.S. dollar and the ongoing Kuwait oil worker strike supported oil prices.
The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, increased 2.1% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, rose 2.0% on Tuesday as WTI futures added 2.9% to $41.0 per barrel and Brent futures were up 2.3% to $43.9 per barrel.
The U.S. Dollar Index, which tracks the movement of the USD against a group of developed market currencies, dipped 0.5% to 94.0 Tuesday, a 10-month low – a weaker greenback makes USD-denominated commodities like oil cheaper for foreign buyers.
[related_stories]The labor stop in Kuwait cut daily output by as much as 1.7 million barrels and entered its third day, reports Mark Shenk for Bloomberg.
“Having a strike in one of the the most stable, better-run producers comes as a big surprise,” Francisco Blanch, head of commodities at Bank of America Merrill Lynch, told Bloomberg. “The market viewed the sell off as a buying opportunity. The market is moving from a surplus to a deficit in the second half of the year.”
SPDR Oil & Gas Equipment & Services ETF