Shares of exchange-traded funds focused on energy were surging Monday after a large group of oil producers known as OPEC+ surprised markets with a planned cut in crude production.
Shares of the Energy Select Sector SPDR Fund
XLE,
were up 3.9% around midday Monday, while the Vanguard Energy ETF
VDE,
rose 4.1%, and SPDR S&P Oil & Gas Exploration & Production ETF
XOP,
climbed 3.4%, FactSet data show, at last check. The United States Oil Fund LP
USO,
was trading 5.4% higher, on pace for its largest daily percentage increase since March 2022.
On Sunday, OPEC+ member countries including Saudi Arabia announced plans to cut more than 1 million barrels of oil production a day through the end of the year beginning in May. Saudi Arabia will lead the reduction with a cut of 500 thousand barrels per day.
“The surprise production cut from OPEC+ over the weekend has both oil prices and oil-related stocks rallying,” Bespoke Investment Group said in a note Monday, ahead of the U.S. stock market’s open.
“While energy stocks are notoriously volatile,” Monday appeared set to be just the ninth time since 2000 that the Energy Select Sector SPDR Fund has “gapped up at least 3%” even as the SPDR S&P 500 ETF
SPY,
“gapped down or up less than 0.5%,” Bespoke said.
The red dots in the chart below indicate the days the Energy Select Sector SPDR Fund, which tracks an index of U.S. energy companies in the S&P 500, “gapped up” more than 3% while “the S&P 500 was basically flat or down at the open,” according to the note.
BESPOKE INVESTMENT GROUP NOTE ON APRIL 3, 2023
The Energy Select Sector SPDR Fund, which trades under the ticker XLE, has broken above its 200-day moving average of $82.25, according to FactSet data, at last check. Shares of the ETF were trading at about $86 around midday Monday.
“When you combine this technical development” with the past weekend’s “bullish development” on the supply side for crude oil, energy stocks appear set to potentially “outperform nicely in the weeks and months ahead,” said Matthew Maley, chief market strategist at Miller Tabak + Co., in an emailed note Monday.
Shares of XLE on Monday were above their trading high on Friday of $82.97, according to FactSet data.
The U.S. stock market was trading mixed around midday Monday, with the S&P 500
SPX,
about flat while the Dow Jones Industrial Average
DJIA,
rose 0.7% higher and the technology-laden Nasdaq Composite
COMP,
fell 0.8%, according to FactSet data, at last check.
Meanwhile, U.S. oil prices were up sharply around midday, with West Texas Intermediate crude
CL00,
CL.1,
trading about 6% higher at around $80 a barrel.
Read: Oil prices holding big gains after surprise OPEC+ production cut
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