Energy Select Sector (XLE) ETF is slipping: Here’s the price to watch

The Energy Select Sector SPDR Fund (XLE) ETF stock price has pulled back in the past few days as the price of crude oil has retreated. The fund has dropped from the year-to-date high of $92.95 in September to $85. It is now sitting at the lowest level since August 8th.

Crude oil price has retreated

The Energy Select Sector SPDR Fund is a leading ETF that tracks the biggest companies in the oil and gas sector. Precisely, it tracks the Energy Select Sector Index, which is made up of the biggest energy companies in the S&P 500 index.

The biggest parts of the company are Exxon Mobil, Chevron, EOG Resources, Schlumberger, ConocoPhillips, and Marathon Petroleum. A key challenge for the fund is that its biggest ten companies account for over 70% of the fund.

Exxon Mobil accounts for 23.64% of the fund while Chevron has 18.85%. This means that a major issue in the fund could have a major implication for the ETF. 

In most periods, the XLE ETF reacts to the price of crude oil. This explains why the fund has retreated in the past few days. Brent, the global benchmark, has crashed from last month’s high of $95 to $84.55. West Texas Intermediate (WTI) has slipped to $82.82 as concerns about demand continues.

Still, there is a likelihood that the fund will continue rising in the coming months. First, the current crude oil sell-off could be temporary because of the rising demand around the world. The IEA believes that the daily oil demand will be more than 101 million barrels per day. It expects oil demand to grow by over 1 million barrels per day. 

Supply is not growing as fast. For one, it seems like OPEC+ is committed to leaving oil prices higher for longer by cutting production. Analysts at JP Morgan believes that crude oil price will jump to $150 in 2024.

Second, companies in the XLE ETF will still continue benefiting as long as oil remains above $70 for a while. 

XLE ETF stock price forecast

XLE chart by TradingView

The daily chart shows that the Energy Select Sector SPDR Fund peaked at $92.95 in September as the price of crude oil soared. This price was important because it was slightly above the key resistance at $91.25, the highest point in November 2022. 

Now, the shares have drifted downwards and moved below the important support at $86.30, the highest swing on April 12th. It has also dropped below the 50-day moving average while the Relative Strength Index (RSI) moved below the neutral point.

Therefore, the XLE ETF will likely continue falling as sellers target the key support at $80.9, the lower side of the ascending trendline. This line connects the lowest level since July 2022. A move to this level will likely resume the bullish trend.