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Oil ETFs: Down on Oil Price Increase and XOM Earnings Miss

by: Tom Lydon May 02, 2008 | about stocks: DCR / IXC / IYE / UCR / XLE    
Tom Lydon

Tom Lydon

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As oil prices head south, one ETF shot way up.

MACROshares Oil Down (DCR) closed up 10.6% in trading Thursday after oil speculators pulled out of the market. Crude settled at $112.52, stripped of its appeal to investors as the dollar gained strength, says John Wilen for the Associated Press. Oil is sitting at its lowest level since April 14, but analysts caution that it could be temporary.

Meanwhile, the MACROshares continue to trade as they normally would after hitting a termination trigger on April 16. Sam Masucci, MacroShares' CEO, says both Oil Down and MACROshares Oil Up (UCR) will trade as though they normally would.

On June 25, they'll cease trading. On July 3, shareholders of the funds will receive payouts based on the fund's net asset value [NAV] on that day. The funds are raking in assets, says Masucci, pulling in $120 million this week.

The company has filed with the SEC for its second set of up/down oil ETFs. The hope is that they'll get the go-ahead before the first set of funds terminate.

Exxon Earnings Put the Brakes on Energy ETFs

Some energy ETFs were down more than 4% in midday trading after Exxon Mobil (XOM) reported a first-quarter profit jump that was less than what Wall Street was expecting.

You can't blame Wall Street for expecting more, considering the price of a barrel of oil these days. Even though Exxon's 17% profit jump to $10.9 billion was the second largest U.S. quarterly profit ever, it still wasn't enough.

Analysts were expecting $2.13 per share, but instead got $2.03 a share, reports John Porretto for the Associated Press. Exxon posted the largest quarterly profit in history for a U.S. company at the end of 2007.

Exxon's shares were down nearly 5% midday on Thursday, weighing down some of the energy ETFs that count the company as a major component:

  • iShares Dow Jones US Energy (IYE): Exxon is 23.1%; up 4.4% year-to-date
  • Energy Select Sector SPDR (XLE): Exxon is 18.5%; up 3.3% year-to-date
  • iShares S&P Global Energy (IXC): Exxon is 15.8%; up 2.9% year-to-date

Also, if you were thinking of moving out of the country in order to escape those high gas prices - not so fast. Of 155 countries surveyed, it turns out the United States is the 45th cheapest, says Steve Hargreaves for CNN Money.

Next time you drive by the pump and sob at $4 gas, think about how people in other countries must feel: in Europe, the average is more than $8 a gallon; in Aruba, it's $12.03 and in Sierra Leone it's $18.42.

If you're really itching to move, consider Venezuela, where it's 12 cents a gallon. Or Saudi Arabia at 45 cents.

But the numbers don't take some things into account: the falling value of the dollar, the differing salaries in countries and so on.

In Europe, the trade-off for the gas prices is cheaper health care and higher education, which is paid for partly through gas taxes. Europe also sports a better public transportation system.

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This article has 3 comments:

  •  
    May 03 11:29 PM
    12 cents a gallon, wow. Didn't know oil was that cheap anywhere.

    www.stocks-simplified....
    Reply
  •  
    May 03 11:31 PM
    The reason gas is expensive in Europe and cheap in Venezuela is government policy. European and Japanese governments wisely taxed gas heavily from the beginning (it was over $2 a gallon in Europe in the 1960's). Venezuela subsidizes to keep the price below cost.

    Low gas prices encourage consumption. In the US, cheap gas led to the suburb phenomenon and SUV proliferation. Now everything is so spread out and public transit is so neglected that we are very badly positioned to handle looming shortages and high prices.

    Instead of this stupid gas tax holiday that McCain and Clinton propose (the federal tax is 18 cents/gallon), it would be far wiser to increase the tax, say $1/gallon, and then redistribute that revenue back to the population by reducing other taxes. Our current system encourages waste and inefficiency.
    Reply
  •  
    May 04 10:32 AM
    Amen on the stupid gas tax holiday. The taxes should have been higher all along. But as long as the Congress/government is for sale for a few bucks, these stupid decisions will continue.
    Reply
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