Energy ETFs Had a Fairly Good Week: Last Week's Key Trends
The iPath S&P GSCI Crude Oil Total Return Index ETN
The iPath S&P GSCI Crude Oil Total Return Index ETN (OIL) provides exposure to WTI crude oil futures prices. It’s one of the closest competitors of its ETF equivalent, the United States Oil Fund (USO). Because both OIL and USO track WTI crude oil prices, they both fell in the week ended August 14. However, OIL declined by 4.85%, which was slightly more than the ~3.91% decline USO saw in the same week.
Apart from commodity ETFs, lower oil prices also hurt stock ETFs such as the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), which holds upstream companies like Occidental Petroleum (OXY) and Hess (HES). Lower oil prices are also negative for MLPs such as MarkWest Energy Partners (MWE) and Magellan Midstream Partners (MMP). These MLP companies make up ~15% of the Alerian MLP ETF (AMLP).
Comparing performances
Both OIL and USO underperformed the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), which saw an increase of 5.21% in the week ended August 14. Check out Part 2 of this series to read more about XOP’s performance.
In comparison, the Energy Select Sector SPDR ETF (XLE), which is dominated by integrated and large energy companies, gained 3.45% in the week ended August 14. Oilfield services and equipment ETF Market Vectors Oil Services (OIH) gained 1.14% while the Alerian MLP ETF (AMLP) gained 1.18% as, we saw in the previous part of this series.
About ETNs
Apart from exchange-traded funds, investors can also opt for ETNs (exchange-traded notes). ETNs act like bonds, or a debt security issued by a bank or a financial institution like Barclays (BCS). BCS is OIL’s issuer. ETNs represent a promise from the issuer to pay returns in a pattern that mirrors returns from an underlying benchmark index, which would be the S&P GSCI Crude Oil Total Return Index in OIL’s case. Unlike ETFs, which pay out dividends, ETNs issue quarterly coupons or interest payments.
You can read more about the difference between ETFs and ETNs in our Comparison of exchange-traded funds and exchange-traded notes.
Read more articles on Market Realist’s Energy & Power page to learn more about the energy sector.
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