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Energy ETF, Stock Gainers Even as Crude Crashes to Below Zero

Oil prices collapsed to below zero for the first time in history with buyers avoiding delivery of physical crude. The economic turmoil caused by the coronavirus crisis has resulted in crashing demand and rising stockpiles.

Notably, the price of the West Texas Intermediate crude oil futures May contract crashed by more than 300% to just -$40.08 per barrel at one point on Apr 21. The selling had WTI on track to close at its lowest level since recordkeeping began in March 1983, according to Dow Jones Market Data. A negative price suggests that sellers were paying buyers to take deliveries in a bid to avoid incurring storage cost.

Meanwhile, the June contract dropped 18% to $20.43 per barrel. This has created a huge contango (the front-month contract is lower than the next-month contract) in the futures market, which indicates an oversupply condition.

Efforts taken by the OPEC and its allies to cut oil production by 9.7 million barrels a day starting on May 1 through Jun 30 to balance the oil market have not been able to lift the sector’s sentiments (read: OPEC Output Deal Cut: Will It Help Oil & Energy ETFs?).

The International Energy Agency (IEA) warned of lowest oil demand in 25 years, citing lockdown in numerous countries and territories to contain the novel coronavirus. The agency expects oil demand in April to fall below last year’s average by 29 million barrels per day to levels not seen since 1995. Oil demand is expected to drop 23.1 million barrels per day in the second quarter before a gradual recovery in the second half of the year.

The sharp drop in demand has pushed crude stockpiles at Cushing — America’s key storage hub – to about 55 million barrels, up 48% since the end of February, according to a recent report from the Energy Information Administration (EIA). Per ClipperData Crude, stockpiles are now above 500 million barrels for the first time since June 2017. Further, a flight to safety, following weak retail and factory data, pushed the dollar higher against the basket of currencies. The strength in dollar made dollar-denominated assets expensive for foreign investors, potentially diminishing demand for commodities.

Despite the crash, many ETFs & stocks from the energy sector managed to stay in green on the Apr 20 trading session. We have highlighted these below:

First Trust ISE-Revere Natural Gas Index Fund FCG – Up 4.1%

This fund offers exposure to U.S. stocks that derive a substantial portion of their revenues from the exploration and production of natural gas. It follows the ISE-REVERE Natural Gas Index and holds 34 stocks in its basket, with each accounting for less than 10.5% share. The fund has amassed $66.9 million in its asset base while charging 60 bps in annual fees. Volume is good with 969,000 shares exchanged per day on average. The product has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook (read: 5 Best Sector ETFs Halfway Through April).

Invesco Dynamic Energy Exploration & Production ETF PXE – Up 2.4%

PXE follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value. Holding 30 stocks in its basket, the fund is skewed toward the top holdings with each accounting for no more than 10% of the assets. It is relatively unpopular with AUM of $13.2 million and lower average daily volume of 26,000 shares. Expense ratio comes in at 0.63%. The fund has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook.

Invesco Dynamic Oil & Gas Services ETF PXJ – Up 2.4%

This product follows the Dynamic Oil Services Intellidex Index, which thoroughly evaluates companies based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value. It holds 25 stocks in its basket with each accounting for no more than 8.2% of assets. The ETF has accumulated $4.7 million in its base and trades in average daily volume of 30,000 shares. It charges 63 bps in fees per year and has a Zacks ETF Rank #5 with a High risk outlook (read: Oil Closes Below $20: ETFs to Gain & Lose).

VanEck Vectors Energy Income ETF EINC – Up 1.6%

This fund offers exposure to North American companies involved in the midstream energy segment, which includes MLPs, and corporations involved in oil and gas storage and transportation. It follows the MVIS North America Energy Infrastructure Index, holding 29 stocks in its basket with each making up for less than 10%. The ETF has AUM of $20.7 million and average daily volume of 5,000 shares. It charges 45 bps in annual fees and expenses.

Eclipse Resources Corporation MR – Up 26.8%

This exploration and production company is principally focused on the Utica and Marcellus Shales of southeast Ohio, West Virginia and North Central Pennsylvania. With market cap of $136.1 million, the stock has a Zacks Rank #1 (Strong Buy) and VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

Antero Resources Corporation AR – Up 23.9%

It is one of the fast-growing natural gas producers in the United States. The stock has a market cap of $395.6 million and Zacks Rank #3 (Hold). The VGM Score stands at B.

Antero Midstream Corporation AM – Up 18.2%

This company is a leading provider of integrated and customized midstream services. With a market cap of $1.7 billion, Antero Midstream has a Zacks Rank #3 and VGM Score of B (see: all the Energy ETFs here).

Goodrich Petroleum Corporation GDP – Up 16.9%

This exploration and production company is engaged in the exploitation, development and production of natural gas and crude oil primarily in the Haynesville Shale in Northeast Texas and Northwest Louisiana, the Tuscaloosa Marine Shale in Eastern Louisiana and Southwestern Mississippi and the oil-window of the Eagle Ford Shale trend in South Texas. The stock has a Zacks Rank #3 and VGM Score of B. It has a market cap of $74.3 million.

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Antero Midstream Corporation (AM): Free Stock Analysis Report
 
Eclipse Resources Corporation (MR): Free Stock Analysis Report
 
Goodrich Petroleum Corporation (GDP): Free Stock Analysis Report
 
Antero Resources Corporation (AR): Free Stock Analysis Report
 
First Trust Natural Gas ETF (FCG): ETF Research Reports
 
Invesco Dynamic Oil & Gas Services ETF (PXJ): ETF Research Reports
 
Invesco Dynamic Energy Exploration & Production ETF (PXE): ETF Research Reports
 
VanEck Vectors Energy Income ETF (EINC): ETF Research Reports
 
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