The energy sector is struggling as oil prices slide, a scenario that is pressuring equity-based exchange traded funds such as the Energy Select Sector SPDR (NYSEArca: XLE). XLE, the largest equity-based energy exchange traded fund, is down 7.3% year-to-date.

The challenge for energy equities is that some oil market observers see more declines coming for crude. Oil traders are concerned over how fast U.S. shale oil producers will increase production to capture the rising prices.

Rig counts have recently ticked higher and with credit and earnings issues improving for some U.S. shale drillers, those companies may seize the opportunity to exploit higher pricing in the near-term. Global energy ETFs are struggling, too. Just look at the iShares Global Energy ETF (NYSEArca: IXC), which is down more than 5%.

Energy is one of a small amount of sectors that still trades at a noticeable discount relative to long-term averages. Additionally, the energy sector is usually among one of the largest sector weights in value ETFs, underscoring the point that the group is attractively valued relative to some defensive sectors, which trade at lofty multiples.

Some analysts believe the energy sector’s growth prospects remain attractive following the dip to start 2017.

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