As is being widely reported, the energy sector is back to the top spot among the S&P 500 sectors, and plenty of exchange traded funds are reflecting that lofty status.
The Invesco Dynamic Energy Exploration & Production ETF (PXE) is part of that group, performing, well, dynamically this year. Thanks to oil’s 2021 resurgence, PXE has nearly doubled.
While that may imply that upside from here is limited, the opposite may be true as some Wall Street experts are wagering that oil prices could soon eclipse $100 per barrel or even go higher than that.
What’s interesting about the state of the old guard energy industry today is the split between oil prices and the energy sector’s respective price actions. For example, Brent crude prices, the global benchmark, have returned to and surpassed their pre-coronavirus pandemic highs. However, the S&P 500 Energy Index still needs to gain a few percentage points to reclaim its pre-pandemic highs. As energy stocks continue grinding their way back to 2019 levels, PXE should benefit.
PXE, which tracks the Dynamic Energy Exploration & Production Intellidex Index, is highly levered to the trend of rising oil prices because many of its 30 holdings are exploration and production firms — a segment of the energy sector that historically has tight correlations to oil prices in either direction. Additionally, many PXE member firms are also natural gas producers, and that’s a relevant point because “natty” is one of this year’s best-performing commodities.