Related: Is the Slump Over? Shifting Views on Energy ETFs
Current OPEC compliance with production cut plans remains above their historical average, and it usually takes between two to three quarters for inventories to normalize after the cuts. The challenge for energy equities is that some oil market observers see more declines coming for crude. Oil traders are concerned over how fast U.S. shale oil producers will increase production to capture the rising prices.
“Because the price of oil started so low in [the third quarter]and gradually increased throughout the quarter, we’re really not expecting to see that flow through to earnings this quarter. It will likely be next quarter,” Tepper said, according to CNBC, adding that he is looking for positive momentum across earnings reports to confirm the equities are moving “in the right direction.”
Investors have added nearly $153 million to XLE since the start of the fourth quarter, showing modest enthusiasm for the bellwether energy ETF.
For more information on the oil market, visit our oil category.