YTD energy & utility performances

Mike Zaccardi, CFA, CMT

Natural gas prices jumped 6% last week as the nation transitions from heating to cooling degree days. The rolling 12-month strip advanced less than 1%, however. The prompt-month continues to trade within a rather broad range from the $1.50s to around $2.00. Downtrends in other parts of the forward curve persist – year over year the June 2020 contract is off about 30% while calendar strips beyond 2024 are also lower by about 30%. 2021 has been the only timeframe that has held up okay.

Other big news last week was another significant decline in oil rigs as reported by Baker Hughes in the weekly survey on Friday; it was an 8% fall off in active rigs bringing the year-on-year decline to a whopping 70%. Natural gas directed rigs are down 58% versus this time a year ago. Oil production is another big story – with lower prices comes reduced incentive to drill. The latest reading on U.S. oil production is 11.5 million barrels per day, a drop of 1.6 million barrels per day in the last two months. Gasoline futures had a stellar week, jumping 7% and hitting their highest level since before the COVID-19 plunge; back above $1.00 on RBOB futures.

It’s fun to check in on the renewable energy ETFs from time to time. TAN, the basket of solar stocks, was up 6% last week, bringing it positive on the year, remarkably. FAN, the wind ETF, was up just 3% but is still down 13% in 2020. Overall though, energy equities are down big this year despite massive moves off the March 23 low in stocks. Oil & gas exploration and production firms have been some of the best performers in the last two months, and they were up another 10% last week. Utility stocks (XLU) remain confined to a rangebound trade in the last 6 weeks.

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