XOP - Popular energy ETF XLE falls to a 2-month trading low

2023-05-31 14:33:58 ET

Popular broad-spectrum energy exchange trade fund Energy Select Sector SPDR Fund ETF ( NYSEARCA: XLE ) dropped to its lowest level in two months on Wednesday, dragged down by a dip in oil ( CL1:COM ) prices.

Oil fell 1.3% to the $68.75 per barrel range during midday trading. This, in turn, put pressure on XLE, which slumped to $76.54 -- its lowest point since March 24.

Looking longer term, XLE has declined by 13% since mid-April.

Despite the recent slide, Seeking Alpha analyst Stuart Allsopp said investors should “buy the dip” in XLE as oil majors have been able to generate record free cash flows despite the drop in oil prices. Allsopp added : “The world remains as heavily dependent on crude oil as ever, with global oil demand back at pre-Covid highs despite government efforts to reduce fossil fuel consumption.”

At the same time, fellow SA analyst Skeptical 12 added that XLE should hold up well if a recession takes place. The analyst stated : “The oil industry is in a very strong cash position, a recession shouldn't stop upstream or downstream companies from continuing to return cash to shareholders with buybacks and dividend increases.”

XLE was not the only energy-focused fund to find itself in negative trading territory on Wednesday. Other ETFs that were lower include the Vanguard Energy Index Fund ETF ( VDE ), SPDR S&P Oil & Gas Exploration & Production ETF ( XOP ), US Oil Equipment & Services iShares ETF ( IEZ ), S&P Oil & Gas Eqpt & Services SPDR ( XES ), and the Vaneck Oil Services ETF ( OIH ).

Year-to-date price action: XLE -8.9% , VDE -8.8% , XOP -8.2% , IEZ -14.1% , XES -10.5% , and OIH -14.4% .

More on the Energy Market:

• U.S. crude oil slides below $70; natural gas plunges on record output
• Weak demand for fuel pushes down gasoline pump prices for Memorial Day
• VDE: After Predicted Sell-Off, I'm A Buyer Again (Rating Upgrade)

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