An Energy ETF That's Actually Surging

If investors have heard one thing about the energy sector this year, it is about how poorly the group is performing. Simply put, energy is the worst-performing sector in the S&P 500 in 2017. The Energy Select Sector SPDR XLE, the largest energy exchange traded fund by assets, is down 16.4 percent year to date.

That does not mean all energy ETFs are struggling. At what has clearly been a challenging time for the energy sector, the VanEck Vectors Oil Refiners ETF CRAK is up nearly 21 percent year to date after hitting a record high last Friday.

CRAK tracks the MVIS Global Oil Refiners Index, “a rules-based, modified capitalization weighted index intended to give investors a means of tracking the overall performance of companies involved in crude oil refining which may include: gasoline, diesel, jet fuel, fuel oil, naphtha, and other petrochemicals,” according to VanEck.

Stormy Weather

In anticipation of Tropical Storm turned Hurricane Harvey making landfall along the Gulf Coast of Texas, CRAK jumped almost 1 percent on heavy volume last Friday. Refiners with operations in Houston as opposed to Corpus Christi, Texas, could benefit.

“That lends Houston operators a certain competitive advantage right off the bat, and the temporary loss of refined products output from Corpus Christi and the surrounding area — all 821,000 barrels per day of regional capacity has been shut in already, according to releases from the companies that operate there,” according to the Houston Business Journal.

CRAK, which just turned two years old, holds 26 stocks and is the only ETF dedicated to refiners equities. The ETF's top 10 holdings include Phillips 66 PSX, Valero Energy Corporation VLO and Marathon Petroleum Corp MPC.

A Global Affair

Investors should be careful when betting on upside for CRAK on the back of US-related events because the ETF devotes than 27 percent of its weight to U.S. refiners. CRAK features exposure to more than 15 countries with Japan and India combining for 20 percent of the ETF's weight.

Dwindling inventories are also seen as a catalyst for some CRAK constituents.

“Inventories of diesel, heating oil and jet fuel are approaching their lowest seasonal levels in three years, fueling expectations among refining executives, traders and analysts that strong margins will help the bottom line for refiners through year-end,” according to Reuters.

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