One of the biggest stories in the financial markets this week
has been the precipitous decline of oil futures. The United States
Oil Fund (NYSE:
), which tracks West Texas Intermediate futures, lost 7.4 percent
in the first three trading days of the week. That slide includes a
4.1 percent tumble on volume that was more than twice the daily
average on Wednesday.
The United States Brent Oil Fund (NYSE:
), which tracks the global benchmark contract, was off 7.6 percent
through Wednesday. BNO gave up 3.6 percent on volume that was more
than triple the daily average on Wednesday.
Clearly, it has been a tough week for the oil bulls, but some
equity-based energy ETFs are showing some fortitude in the face of
sour headlines. That is to say these ETFs are performing at a rate
that is less bad than rival funds. The two "standouts" share one
thing in common: Higher exposure to refining equities than is found
in many other energy ETFs.
Traders Guy Adami and Joe Terranova both spoke positively about
the refiners with Adami particularly bullish on Valero (NYSE:
The trade makes sense when crude prices are too high, demand
erodes and refining margins are suppressed. Additionally, hedging
oil futures at elevated prices increases input costs for refiners,
but if oil prices extend recent declines the refiners will benefit
from lower input costs.
With no ETF devoted exclusively to refining names, investors
looking to get exposure to multiple stocks in this sub-sector will
want to consider two ETFs. The IndexIQ Global Oil Small Cap ETF
) is home to several U.S.-based and international refiners. Tesoro
) and Sunoco (NYSE:
) are the ETFs' third- and fourth-largest holdings, respectively,
combining for about 16 percent of the fund's weight.
Refining exposure has not been a silver bullet for IOIL, but the
prominence of Tesoro and Sunoco within the ETF is hard to ignore.
So is the fact that since the start of the week, while down, has
outperformed the SPDR S&P Oil & Gas Exploration &
Production ETF (NYSE:
) and the iShares Dow Jones US Oil Equipment Index Fund (NYSE:
By name alone, the PowerShares Energy Exploration &
Production Portfolio (NYSE:
) would sound like an ETF destined to fall during this rough patch
for crude and it has. PXE is off 3.4 percent this week, but that is
a better run than XOP's.
PXE's top-10 holdings include three pure-play refiners -
Phillips 66 (NYSE:
), Valero and Marathon Petroleum (NYSE:
). Those names combine for 15 percent of the fund's weight. Further
down PXE's roster, five more refiners are found, including Tesoro,
Sunoco and Holly Frontier (NYSE:
). Overall, more than a quarter of PXE's weight is devoted to
That combined with heavy exposure to integrated oil stocks
should keep PXE performing better than XOP or the iShares Dow Jones
U.S. Oil & Gas Exploration & Production Index Fund (NYSE:
) even as oil prices slide.
For more on refiners and ETFs, click
(c) 2012 Benzinga.com. Benzinga does not provide investment advice.
All rights reserved.