Energy ETFs Retreat on Exxon Q1 Results, Trump Oil Remarks

Energy ETFs retreated Friday after Exxon Mobil (NYSE: XOM) reported first-quarter profits plunged almost 50% year-over-year and President Donald Trump said he called on the Organization of Petroleum Exporting Countries to lower crude prices.

On Friday, the Energy Select Sector SPDR (NYSEArca: XLE) declined 1.7%, Vanguard Energy ETF (NYSEArca: VDE) dropped 1.8%, iShares U.S. Energy ETF (NYSEArca: IYE) fell 1.8% and Fidelity MSCI Energy Index ETF (NYSEArca: FENY) decreased 1.7%. The broad energy sector-related ETFs were all trading below their long-term trend lines and were also testing their short-term support at the 50-day simple moving average.

Dragging on the energy sector, Exxon Mobil stated first quarter profits tanked for its downstream business that focuses on refining oil into fuels like gasoline due to high stockpiles, along with a heavy slate of refinery maintenance, CNBC reports. The energy giant also warned that maintenance costs will continue to weigh into the second quarter.

Exxon shares declined 2.9% Friday. XOM makes up 24.3% of IYE’s underlying portfolio, 23.2% of FENY, 23.1% of VDE and 22.5% of XLE.

Exxon generated $2.35 billion in the first quarter, compared to the $4.65 billion a year ago, with earnings per share at 55 cents, compared to expectations of 70 cents.

Trump on Crude Oil

Further weighing on the energy sector, President Trump said he called the global oil cartel about the high price of crude, which led to a 3.4% decline in West Texas Intermediate crude oil futures to $63.0 per barrel.

“Gasoline prices are coming down. I called up OPEC, I said you’ve got to bring them down. You’ve got to bring them down,” Trump said in a Reuters report.

Prices also continued to extend losses following the report on expectations that major producers like Saudi Arabia would increase oil output to offset the shortfall in Iranian crude due to the U.S. sanctions. The White House previously ended waivers for buyers of Iranian oil after they expire on May 2, which could reduce Iran’s oil output from 1 million barrels per day to 500,000 barrels per day.

“You’re going to see the Saudis and the Nigerians and maybe the Russians pick up the ball a little bit. But they’re also signaling that they’re going to wait and see how bad it is,” Donald Morton, senior vice president at Herbert J. Sims & Co., told the Wall Street Journal. “They want to see the actual impact of this cut.”

For investors looking for continued upside in U.S. cyclical sectors over defensive sectors, the Direxion MSCI Cyclicals Over Defensives ETF (NYSEArca: RWCD) offers them the ability to benefit not only from cyclical sectors potentially performing well, but from their outperformance compared to defensive sectors.

Conversely, if investors believe that U.S. defensive sectors will outperform cyclical sectors, the Direxion MSCI Defensives Over Cyclicals ETF (NYSEArca: RWDC) provides a means to not only see defensive sectors perform well, but a way to capitalize on their outperformance compared to cyclical sectors.

For more information on the market sectors, visit our sector ETFs category.