Are Energy ETFs Finally Ready to Rally?

Investors are all too familiar with the energy sector’s 2017 tale of woe. The seventh-largest sector weight in the S&P 500, the energy sector is also, by far, the worst-performing group in the benchmark U.S. equity index this year.

The Energy Select Sector SPDR (NYSEArca: XLE), the largest exchange traded fund dedicated to energy equities, is down 12.6% year-to-date. However, XLE is higher by 2.2% over the past month, prompting some speculation the energy sector and the related ETFs could be on the mend.

Investors considering ETFs such as XLE and rival ETFs such as the Fidelity MSCI Energy Index ETF (NYSEArca: FENY) and the Vanguard Energy ETF (NYSEArca: VDE) need to again monitor oil production data and credit issues at smaller energy producers.

Obviously, production is a key element in the decision-making process regarding energy investments. Currently, oil investors face conflicting reports regarding output. For example, Venezuela’s crude output is plunging to multi-year lows while Algeria is looking to boost production.

While demand has yet to catch up to elevated supplies, rebounding economies in Europe and steady economic growth in the U.S. could at least keep oil prices steady around current levels in the second half of 2017.