The Energy Select Sector SPDR (NYSEArca: XLE), the largest exchange traded fund dedicated to energy equities, has been the worst performer among the sector SPDR ETFs this year, but XLE rebounded nicely in July, posting a gain of almost 3.1%.
While XLE would need to gain more than 11% just to be flat for the year, there is rising optimism that the energy sector could finally be ready to shake out of its 2017 slumber.
iven the historical sensitivity of exploration and production names to oil prices, it would stand to reason that lower oil output would benefit the industry. While the Organization of Petroleum Exporting Countries (OPEC) has moved to trim output, U.S. shale producers are boosting production as highlighted by the rising rig count in the U.S.
While OPEC is cutting back to alleviate price pressures, U.S. fracking companies could jump to capitalize on the windfall as crude oil prices jump back above $50 per barrel – according to some estimates, shale oil producers can get by with oil at just over $50 per barrel due to advancements in technology and drilling techniques that have helped cut down costs.