Oil prices increased on Thursday by more than a dollar per barrel, sending energy stocks higher as the broader market continues its decline.
Despite a large increase in U.S. crude oil inventories, the recent rally in energy prices has been supported by increasing demand in China. According to the latest export figures, demand in China climbed by nearly one million barrels per day in November, and energy markets are anticipated to be tighter this year, particularly if China’s economy continues to rebound.
Brent crude futures increased 1.5% and WTI crude were up 1.3% by mid-afternoon on Thursday. Notably, both benchmarks hit their highest prices in over a month on Tuesday, Reuters reported. Meanwhile, the S&P 500 is down 0.4% in mid-day trading on Thursday, while the energy sector is up 1.5%.
The Invesco S&P 500 Equal Weight Energy ETF (RYE) is a way for investors to get balanced exposure to the energy sector. An equal-weight methodology can be particularly impactful in the top-heavy energy industry, where traditional cap weighting can result in significant concentration risks.
RYE tracks an index that equally weights stocks in the energy sector of the S&P 500 Index. RYE holds 24 securities, including Occidental Petroleum Corporation (OXY), Targa Resources Corp. (TRGP), ConocoPhillips (COP), Hess Corporation (HES), and ONEOK Inc. (OKE).
RYE returned 57.8% in 2022, and has increased 1.6% year to date, according to YCharts.
Investors have continued to allocate to the fund as energy has remained a top performer, further propelled by energy companies’ solid balance sheets and positive forecasts for 2023. RYE, which has $605 million in assets under management, has accreted $127 million in flows over a one-year period. The fund charges an expense ratio of 40 basis points.
The sector ranks first in average dividend yield, according to ETF Database, making it particularly attractive in the current environment. Equities that pay dividends are typically better positioned in inflationary and recessionary environments than the broader equity market or fixed income investments.
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