“The energy slump that we saw really was about natural gas, not about oil, because oil was actually doing reasonably well, and we had very a high compliance within OPEC. So everybody was reasonably positive on oil stocks, while natural gas got hit by the double whammy; they went into the winter with huge stockpiles, and then the winter was very warm, and so we had very low demand, and that’s what really killed the energy sector,” said Gina Sanchez, CEO of Chantico Global, in an interview with CNBC.
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 also lower on a year-to-date basis.
XLE and other energy ETF’s have worrisome technicals in the eyes of some technical traders.
“A mixture of fundamental and technical factors are going to send oil lower, including rising rig counts and production. The Energy Select Sector SPDR ETF, the XLE, is stuck in a “tremendous” downward sloping channel,” Bill Baruch, senior market strategist at IiTrader, said to CNBC.
For more information on the oil market, visit our oil category.