Energy ETFs Rise With Middle East Rocketfire: Weekly Energy ETF Report
Energy ETFs finished out the week in green as rockets started to fly in Israel
Energy ETFs finished this week in the green as Israel and Gaza began fighting, again throwing the region into instability. Energy prices and Energy ETFs typically respond to any type of conflict in the Middle East, as Middle East instability could result in fewer oil exports, thereby squeezing supply and raising prices.
Energy ETFs as a whole however have been moving sluggish and sideways lately, likely due to fears regarding the fiscal cliff and the newly declared “European Recession.” Since growing economies typically need more energy to run (thus increasing demand and raising prices), economic dampers such as the fiscal cliff and a European recession will likely reduce demand for energy, thereby reducing prices.
So, with a heated Middle East coupled with a rapidly approaching fiscal cliff and European Recession, energy prices are at a crossroads of which direction to go, with the Israeli-Gaza war likely being the determining factor of whether energy prices rise or fall long term. In other words, if the Israeli instability spills over into the rest of the Middle East, energy prices could see a significant up turn.
A chart below of the United States Oil Fund ETF (NYSEARCA:USO) accurately depicts the current energy price situation, because any disruption in the Middle East typically sees a sharp reaction from oil prices in the US which typically spill over into other energy ETF prices:
chart courtesy of Stockcharts.com
By looking at the chart above, one can see that oil prices have been consolidating and moving sideways for the better part of November, and saw a recent uptick in price this past Friday, just when Israel and Gaza began heating up. NYSEARCA:USO is up .62% for the week and down -6.5% for the last four weeks, so oil ETFs and energy ETFs as a whole appear to be reacting to the larger issues of the fiscal cliff and European recession. Tensions in the Middle East will likely have to rise to extremely high levels (as in all out war) to warrant a new bull for energy prices, considering the anchors on energy prices right now.
Below is an energy ETF update illustrating weekly trends of the top energy ETFs in the United States:
Weekly Oil ETF Update:
Oil Spot Price: $86.99/barrel, +1.17%
United States Oil Fund LP ETF (NYSEARCA:USO): +.62%, This ETF is a commodity based ETF designed to track the price of West Texas Intermediate Crude Oil. The United States Oil Fund LP ETF (NYSEARCA:USO) reflects the price of oil delivered to Cushing, Oklahoma and is traded as futures contracts on The New York Mercantile Exchange (NYMEX).
United States 12 Month Oil Fund LP ETF (NYSEARCA:USL): +1.01%, This ETF is a commodity based ETF designed to track the price of West Texas Intermediate Crude Oil. The United States 12 Month Oil Fund LP ETF (NYSEARCA:USO) reflects the price of oil delivered to Cushing, Oklahoma and reflects the average of the next 12 months of oil futures contracts on The New York Mercantile Exchange (NYMEX).
Weekly Natural Gas ETF Update:
Natural Gas Spot Price: $3.79/ft3, +7.71%
United States Natural Gas Fund LP ETF (NYSEARCA:UNG): +8.00%, This ETF is a commodity based ETF designed to track the price of Natural Gas delivered to Henry Hub, Louisiana. The United States Natural Gas Fund LP ETF (NYSEARCA:UNG) is traded as futures contracts on The New York Mercantile Exchange (NYMEX).
Weekly Energy ETF Update:
Energy Select Sector SPDR Fund ETF (NYSEARCA:XLE): -.91%, This ETF tracks the performance of the S&P Energy Select Sector Index. The S&P Energy Select Sector Index closely tracks companies within the S&P 500’s Energy Sector, including oil, gas, and energy equipment companies.
iShares Trust Dow Jones United States Energy ETF (NYSEARCA:IYE): -1.18%, This ETF tracks the performance of US Energy Stocks in the Dow Jones US Oil & Gas Index. The Dow Jones US Oil & Gas Index closely tracks oil and gas producers within the energy sector of the US Equities Market.
Bottom line: Energy ETF prices are on a larger bearish trend, only recently brought up alongside increased tensions in the Middle East. With the fiscal cliff on its way and a newly classified European recession, energy prices will likely react to the Middle East violence on a surface level so long as the instability does not spread to the greater region and threaten major oil supply centers.
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Disclaimer: The content included herein is for educational and informational purposes only, and readers agree to Wall Street Sector Selector's Disclaimer, Terms of Use, and Privacy Policy before accessing or using this or any other publication by Wall Street Sector Selector or Ridgeline Media Group, LLC.
