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As Oil Jumps, Largest Energy ETF Spikes To Its Best Level In Two Weeks

Saudi Arabia seems to be on board with Iran pumping oil at maximum levels. (EPA/Newscom)

Energy ETFs rebounded Wednesday on reports that major world oil producers may be in accord on cutting output. The news built up hopes for a floor under crude prices, which have crumbled over the past year amid a persistent supply glut.

Oil prices jumped after major world oil producers were said to have reached an agreement to reduce oil production for the first time since 2008. The OPEC (Organization of the Petroleum Exporting Countries) deal will not be formalized until November.

West Texas Intermediate (WTI) futures settled up $2.35 at $47.05 a barrel.

United States Oil (USO), a commodity ETF investing in near-month WTI futures, added 4.9%.

The oil rally helped energy stocks recover from three consecutive days of losses. The energy sector helped to lead the advance in the S&P 500 Wednesday, along with materials.

Energy Select Sector SPDR (XLE) popped 4.3% in massive volume on the stock market today. Top holdings Exxon Mobil (XOM) and Chevron (CVX) posted gains.

XLE broke through resistance at its 50-day moving average and now sits 3% below its 52-week high, reached Sept. 8. It climbed to its highest level in more than two weeks.

Official U.S. data on crude inventories, released Wednesday, showed a large build in gasoline stockpiles, offsetting a fall in crude stockpiles.

Meanwhile, one ETF provider ProShares launched ProShares K-1 Free Crude Oil Strategy  (OILK). OILK is described as the only crude oil exchange traded fund that is not a commodities partnership, thereby eliminating K-1 tax forms for shareholders.

"Many investors want to invest in crude oil with the convenience of an ETF, but all other crude oil ETFs involve complicated tax reporting," said Michael Sapir, co-founder and CEO of ProShares Advisors. "OILK is the only U.S. ETF that lets investors get crude oil exposure but skip the K-1 tax form."

As an actively managed ETF, the fund's strategy seeks to outperform certain index‑based strategies by managing the rolling of crude oil futures contracts.


IBD'S TAKE: U.S. exploration and production companies are outperforming oil majors thanks to investment in top shale assets. Diamondback Energy is among top energy stocks with prime Permian Basin acreage.


Companies in the metals and mining sector also rose solidly Wednesday. Their gains came despite lower gold prices.

SPDR Gold Shares (GLD) hit a one-week low as the dollar firmed and gold bugs digested remarks from policymakers. Among others, Fed Chair Janet Yellen told the House Financial Services Committee that the pace of interest-rate hikes has no set timetable.

The GLD ETF tracks the price of gold and is sensitive to the Fed's signals on rates. Higher rates increase the opportunity cost of holding gold, a nonyielding haven asset.

The health care sector trailed the S&P 500 Wednesday, dipping 0.2%.

12 Bellwether ETFs

Here's how major exchange traded funds across major asset classes performed today, with IBD Relative Strength Ratings.

The RS Rating is a measure of a stock's price performance over the last 12 months, compared with all stocks and ETFs, on a scale of 1 to a best-possible 99.

Following daily ETF market action can be key to successful investing:

SPDR S&P 500 (SPY), +0.5%, RS 52

PowerShares QQQ (QQQ), +0.2%, RS 68

SPDR Dow Jones Industrial Average (DIA), +0.6%, RS 48

IShares Core S&P Mid-Cap (IJH), +0.9%, RS 59

IShares Russell 2000 (IWM), +0.8%, RS 68

IShares MSCI EAFE (EFA), +0.7%, RS 44

Vanguard FTSE Emerging Markets (VWO), +1.0%, RS 68

SPDR Gold Shares (GLD), -0.3%, RS 63

United States Oil (USO), +4.9%, RS 11

IShares Core U.S. Aggregate Bond (AGG), 0%, RS 33

PowerShares DB U.S.$ Bullish (UUP), +0.1%, RS 23

IPath S&P 500 VIX Short-Term Futures (VXX), -1.1, RS 1