November can be a tricky month for the energy sector, but astute investors can still capture potential upside with exchange traded funds such as the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEArca: XOP), the largest ETF focusing on exploration and production companies.
Plenty of skeptics remain regarding oil’s fundamental outlook. There might be something to that skepticism as many of the world’s major ex-U.S. producers of oil have not displayed a willingness to pare production. Even the output reductions in the U.S. have been modest. The good news is U.S. shale output is slightly declining, but challenges remain on the output front from OPEC producers.
Other ETFs with exploration and production exposure include the PowerShares Dynamic Energy Exploration & Production Portfolio (NYSEArca: PXE) and the Guggenheim S&P Equal Weight Energy ETF (NYSEArca: RYE).
SEE MORE: OPEC Output Freeze Speculation Lift Oil, Energy ETFs
The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, is among the more popular avenues for tapping oil futures.
Some oil market observers believe the commodity can continue rallying, perhaps to $70 per barrel, implying significant upside from Tuesday’s close at $49.33 per barrel. Looking ahead, the Organization of Petroleum Exporting Countries will consider agreeing on output cuts for most members when the group’s energy ministers meet on November 30.
[related_stories]USO’s “price started rallying again in mid-September, peaking in October. Since the October high, the price has retraced about 80% of the most recent advance. Based on the tendency, there is a buy zone between $10.40 (70% retracement) and $10 (90% retracement). With the ETF closing at $10.28 on November 2, that buy zone can be narrowed to $10.30 to $10,” according to Investopedia.
SEE MORE: Energy Stocks, ETFs can Keep Surging
XOP offers its own upside potential for active traders.
“If oil goes up, this ETF should also do well. On Nov. 2 the ETF hit an intraday low of $34.13 that was below the Sept. 27 swing low of $34.85. The breach could signal a bit more downside, but there is support all the way down to $32.10,” according to Investopedia.
For more information on Energy ETFs, visit our Energy category.
SPDR S&P Oil & Gas Exploration & Production ETF
