Analysis
Energy Stocks Set Another Record on a Day Brent Fell
XLE rose 1.80% to $67.20 on October 13, a second record close in a row, even though Brent crude slipped 0.90% to $105.69. ConocoPhillips gained 2.43%, Chevron 1.27% and Exxon Mobil 1.12%.
Energy stocks usually need oil to rise. On October 13 they did not. The Energy Select Sector SPDR (XLE) gained 1.80% to $67.20, beating Monday's record of $66.01 and closing at a new high for the second day in a row. Brent crude, the global benchmark, fell 0.90% to $105.69 a barrel. US crude (WTI) rose 0.43% to $94.14.
The gains were spread across the sector's biggest names. ConocoPhillips rose 2.43% to $140.90, Chevron 1.27% to $217.73, Exxon Mobil 1.12% to $174.08 and Occidental 0.85% to $61.65. Since October 7, XLE has risen from $63.36 to $67.20, about 6.1%, while Brent has gained 5.5% over the same stretch.
There are a few reasons energy shares can rise on a down day for crude. Producers are valued on where oil is likely to be over years, not on a single day's move, so a pullback from a two-month high can leave that longer view unchanged. The narrowing gap between Brent and WTI — from $12.91 on Monday to $11.55 — also helps US producers, which sell at prices closer to WTI. And money leaving technology has been looking for sectors with strong cash flows and dividends.
That last point shows up in relative terms. Since October 7, the semiconductor ETF has fallen 5.9% while XLE has risen 6.1%. Rotation between sectors, rather than a move in the whole market, has been the main story of October so far.
Records in a sector ETF are worth watching rather than chasing. Brent's October 12 close of $106.65 was its highest since mid-September, and it did not hold for a second day. If crude keeps falling while energy stocks keep rising, the gap will eventually have to close one way or the other.