Energy ETFs Rise As Mideast Woes Threatens Shipments


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ETFs tracking oil and gas producers helped power the market higher Monday owing to fears that violence in Egypt and Syria will clog exports out of the Middle East and North African. Crude oil prices paused after rallying 9% over 10 sessions.

PowerShares S&P SmallCap Energy Portfolio ( PSCE ) climbed 1.49% to 41.44, while the SPDR S&P 500 ( SPY ) picked up 0.57% to 163.95.

SPDR S&P International Energy Sector ( IPW ) added 1.17% to 23.29.

Energy Select Sector SPDR ( XLE ) -- the most popular of its kind -- added 0.65% to 80.48.

Light-sweet crude oil futures were flat at $101.24 a barrel -- it's highest level since May 2012. It's risen 4.32% so far this month.

The U.S. imports 171 million barrels a day of oil from the Persian Gulf, according to the Schork Report, specializing in the energy and shipping markets.

"When you combine the flood of bullish investor money (from doctors, dentists and lawyers) into the Nymex along with the threat of a disruption to the flow of Mideast oil, the seeds are sowed for a rally," the Schork Report stated Monday.

Schork is bullish on West Texas intermediate, Brent, gasoline, diesel and gasoil but bearish on natural gas, which is overproduced and supplied from U.S. shale.

"In 2012 the market got to $110.55 (a barrel) on the make-believe loss of Iranian exports. In 2011 we got to $114.82 on the real loss of Libyan exports," the Schork Report said. "Therefore, without a quick, peaceful resolution to the headlines in Egypt, then these recent peaks are well within this market's reach."

But while crude oil has outperformed both the commodity complex and stock market the past month, oil company shares have lagged.United States Oil Fund ( USO ), tracking WTI crude oil prices, has climbed 6.58% in the past month.PowerShares DB Commodity Index (DBC), tracking a basket of energy, agricultural and metals, dipped 2.39% in the past month.

PSCE rose 2.23% in the past month while XLE shed 1.02% and IPW fell 4.20%. That's while SPY dipped 0.52%.

This presents a huge question for investors: Are the stocks underpriced and poised to catch up? Or has fear bid up crude prices too high without regard to fundamentals?

Profits of integrated oil companies such asExxon Mobil (XOM) are more tied to gross domestic product growth than oil prices, says Tom McClellan, founder of the McClellan Market Report.

"More GDP equals more volume of product sold," McClellan said in an email. "Exploration companies are going to be more sensitive to oil prices, much like how a gold producer is going to be sensitive to gold prices more than a jewelry company."

Credit Suisse analysts rate oil field services providers, includingHalliburton (HAL),Baker Hughes (BHI) andSuperior Energy Services (SPN) as overweight.

"We view Halliburton, Baker Hughes and Superior as the best ways to play an improving U.S. rig count and a maturing international landscape in second quarter and for 2013," Credit Suisse analysts wrote in a report released July 3.

Halliburton is buying back shares at an "aggressive" pace, they added.

Baker has strong North American revenue. Superior is underpromising, which should lead to a surprise when it reports second-quarter results.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , ETFs
More Headlines for: IPW , PSCE , SPY , USO , XLE

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