The Energy Select Sector SPDR (NYSEArca: XLE), the largest exchange traded fund dedicated to energy equities, rose 2.6% last week, but it can be said not many investors noticed. Energy, the seventh-largest sector weight in the S&P 500, is the worst-performing group in the benchmark U.S. equity gauge this year.
That much is highlighted by XLE’s 9.2% year-to-date slide and now some market observers argue that a malaise from both bearish and bullish traders is setting in regarding energy stocks. 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. Some traders are not convinced and caution about betting on an energy sector rebound.
“Morgan Stanley’s Ole Slorer says both executives and investors — bears and bulls alike — showed less conviction at the firm’s recent Houston conference than any time he can remember,” reports Crystal Kim for Barron’s.