Why Was the Energy Sector Battered the Most This Week?

Energy Sector Was Battered This Week: What Happened to the ETFs?

(Continued from Prior Part)

Energy sector fell this week

As of May 5, 2016, the energy sector has underperformed compared to other market sectors. The Energy Select Sector SPDR ETF (XLE) fell about 3.1% on a weekly basis as of May 5 and has underperformed other SPDR sector ETFs. The primary reason for the weakness in XLE could be the following:

• 3.4% fall in crude oil (USO) prices until May 5 on a weekly basis

• softness in share prices of downstream companies such as Tesoro (TSO) , Phillips 66 (PSX), Valero Energy (VLO), and Marathon Petroleum (MPC)

These four downstream companies constitute about 12.8% of XLE. The above table shows the performance of XLE compared to other ETFs representing other sectors.

Oil-weighted stocks

Crude oil (USO) (OIL) has risen in last three weeks on a weekly closing basis. The continuing weakness in crude oil prices could be an important factor for oil-weighted stocks such as RSP Permian (RSPP), Abraxas Petroleum (AXAS), Clayton Williams Energy (CWEI), and others. In turn, the weakness in these oil-weighted stocks could help drag down ETFs further.

Browse this series on Market Realist:

• Part 1 - Energy Sector ETFs: Who Leads and Who Lags?