After getting pummeled last year, the Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy exchange traded fund, and rival energy ETFs started 2019 in fine form, but last week’s declines spooked some investors.
Though XLE is still up 8.63% year-to-date, the fund is lower by 2.41% over the past week. Data indicate those declines unnerved some investors.
XLE “lost $632 million last week. That marked its largest weekly outflow since July 2017, data compiled by Bloomberg show,” reports Bloomberg.
Departures from XLE came ahead of a massive earnings week for the energy sector. This week, over 55% of the components in XLE’s underlying index report fourth-quarter earnings. That includes the benchmark’s two largest names – Dow components Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) – later this week.
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“Oil fell below $52 a barrel on Monday after advancing nearly 27% from its Dec. 24 low as OPEC cut production. But news that the U.S. is pumping more has helped reignite supply concerns based on record American output, climbing stockpiles, and uncertainty about whether trade tensions between the U.S. and China will be resolved,” according to Bloomberg.
Last month, the energy sector experienced a short-lived rally after lengthy Organization of the Petroleum Exporting Countries (OPEC) discussions finally came to a conclusion, resulting in a larger-than-expected production cut that sent oil prices higher.
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The energy sector was one of the worst-performing groups in the S&P 500 in 2018, as highlighted by an annual decline of 18.20% for XLE. With oil prices needing positive catalysts, the ability of OPEC to lower output is critical for the commodity’s near-term fortunes. Likewise, some market observers are concerned about U.S. shale producers keeping output high as prices decline.
XLE has seen 2019 outflows of $1.44 billion after losing $1.05 billion last year.
Rivals to XLE include the Vanguard Energy ETF (NYSEArca: VDE), iShares U.S. Energy ETF (NYSEArca: IYE) and the Fidelity MSCI Energy Index ETF (NYSEArca: FENY).
For more information on the oil market, visit our energy category.