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Falling Oil Prices Could Pressure Energy Stocks Lower

NEW YORK (TheStreet) -- U.S. energy stocks continue to lag the broader market as oil prices rapidly decline.

The Energy Select Sector SPDR (XLE) has underperformed the SPDR S&P 500 (SPY)  since June, the last time Brent crude oil prices were greater than $115.

Read More: 7 Stocks Warren Buffett Is Selling in 2014

The energy ETF is most heavily weighted by Exxon Mobil (XOM) , Chevron  (CVX) , Schlumberger (SLB) , ConocoPhillips (COP)  and EOG Resources (EOG) .

Brent crude oil prices are sliding toward two-year lows as geopolitical concerns have slightly diminished and more supply enters the market.

On Monday, Kurdish forces took over the Mosul Dam, Iraq's largest dam, from Islamic State militants. The Kurdish forces received air support from the U.S. and reversed gains made by the Sunni-Muslim insurgents in the north via the capture of the dam.

Iraq is the second-largest oil producer in the Organization of Petroleum Exporting Countries, and conflict in the region has been a major factor in the dramatic rise of the price Brent crude oil over the past few months.

Analysts say that the Kurd's ability to capture the dam is an indicator of growing strength that will help them take back the oil fields as well.

Falling geopolitical risks this week also come alongside increased production in Libya. Libya's production had been disrupted for months by strikes and protests, but showed an increase to 535,000 barrels per day on Sunday. The acceleration was above previous reports, but still far below the 1.4 million bpd pumped last year.

Collectively, however, increased supply and decreasing risks in Iraq have pressured Brent crude oil prices to yearly lows, and prices could fall to less than $100 for the first time since last July if the trend continues.

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