Hurricane Fuels Refinery ETFs More Than Oil

August 31, 2017

Meanwhile, the situation could be even worse for natural gas, which was last trading just below $3/mmbtu and showed little reaction to Harvey.

About 295,000 electricity customers are without power, mostly in Texas, which dampens demand for the power-generating fuel. Moreover, the storm is also disrupting liquefied natural gas exports and exports to Mexico, leaving supply stranded in the U.S.

"Shifting geographic fundamentals mean severe storms will be increasingly bearish for natural gas prices," the Barclays report warned, while noting that the importance of natural gas production in the Gulf of Mexico is down substantially over the past decade, accounting for 4% of the nation's supply, down from 15%.

Refiners Buck Trend

With energy prices flat to lower in the wake of the hurricane, it's no wonder energy stocks continue to struggle.

Within the broader sector, almost every subgroup is hurting. From oil producers to natural gas producers to energy service companies to MLPs, they're all down―with one exception: oil refiners.

At the same time that the broader energy sector has dripped lower day by day, oil refiners have silently moved higher. The VanEck Vectors Oil Refiners ETF (CRAK), which holds stocks of firms that generate more than 50% of their revenue from oil refining, spiked to a fresh record high just this week.

The chart for CRAK, which is up 22.4% year-to-date, is essentially the mirror image of the chart for the aforementioned XLE.

 

YTD Returns For CRAK, XLE

 

 

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