The energy sector has been the worst performing segment of the market and remains in the negative this year as depressed crude oil prices pressured energy producers.
However, with crude price stabilizing, the energy sector and related exchange traded funds are finally returning to positive trend.
The Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based ETF, has gained 10% since its mid-August lows and is now trading at 2.2% above its long-term simple moving average.
With earnings season quickly upon us, the recovering oil prices may help support revenue and earnings growth in the energy sector. According to FactSet data, energy companies int he S&P 500 Index is expected to reveal a 17% year-over-year revenue growth and 108% year-over-year earnings growth, with all segments of the sector expected to report strong earnings except oil and gas equipment and services.
Supporting the improved outlook for the energy sector, crude oil prices have stabilized. West Texas Intermediate crude oil futures now trade around $51.0 per barrel while Brent crude futures are hovering around $56.6 per barrel.
After the Organization of Petroleum Exporting Countries and non-OPEC members like Russia convened in May, major global oil producers agreed to extend their 1.8 million barrel per day supply cut until March 2018. The oil cartel is even hinting at more ways to support price cuts, even calling on the upstart U.S. shale industry to do their part as well. U.S. shale producers have been a thorn in the side of major global oil producers and contributed to the current low prices we see today.