2 Oil ETFs Headed for a Historical Rough Patch

Energy ETFs XOP and DBO tend to underperform in the month of September

Aug 29, 2017 at 3:10 PM
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Oil has been in the headlines recently, as stock and commodity traders keep an eye trained on Tropical Storm Harvey. The former hurricane has wreaked havoc on the oil-rich Gulf Coast, with analysts attributing the coincident decline in oil prices to expectations for waning demand. Against this backdrop, we decided to take a look at two energy exchange-traded funds (ETFs): the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the PowerShares DB Oil Fund (DBO) -- both of which could be in for a rough September, if past is prologue.

Worst Month of the Year for XOP

Exploration-and-production stocks -- many of which are among XOP's top holdings -- have been some of the worst performers since Harvey. The shares of XOP were last seen 0.2% lower at $29.53, set for a second straight down day, and earlier fell as low as $29 -- within striking distance of their Aug. 21 annual low of $28.69. Since touching an annual high of $44.97 in mid-December, it's been a channel of lower highs and lows for XOP, led into the red beneath its 10-week moving average.

XOP oil etf chart

Looking ahead, things could get even rougher for XOP, if history repeats. Since inception, the ETF has lost an average of 2.6% in the month of September, according to Schaeffer's Quantitative Analyst Chris Prybal, marking its worst month of the calendar year.

Options buyers have certainly been betting on more downside for XOP. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the ETF sports a 10-day put/call volume ratio of 2.66 -- higher than 78% of all other readings from the past year. In other words, XOP puts have been bought to open at a faster-than-usual clip during the past two weeks.

DBO In a Historically Rough Stretch

DBO is also pacing for a second straight loss, down 0.1% at $8.09. The fund has been making a series of lower highs since peaking at the start of the year, giving up 16.4% year-to-date. 

DBO oil etf chart

What's more, DBO shares are also headed for a historical rough patch, to say the least. The ETF has averaged a September loss of 2.2% since inception, though its worst months are typically January (down 3.4%, on average) and July (down 2.9%, on average). What's more, DBO has been one of the worst ETFs to own in the second half of the year, and has averaged a loss in every single month from July to December.


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