Oil Prices May Fall to $55 by 2026—Bad News for This Energy ETF

Core Insights - The energy industry is facing a challenging outlook, with forecasts indicating a supply glut that will persist into 2026, leading to a projected decline in crude oil prices by approximately 20% by the end of next year [2][6] Industry Performance - The energy sector has shown a modest year-to-date gain of 7.21%, ranking fifth-worst among the S&P 500's 11 sectors, following a 5.7% gain in 2024 and a 1.3% loss in 2023 [4] - The cyclical nature of the energy sector has resulted in it finishing second-to-last or last among all sectors seven times in the past 11 years [4] Price Forecasts - The EIA's short-term outlook suggests that oil prices will continue to decline due to a sustained global supply surplus, with Brent crude expected to reach $55 per barrel by the end of 2026, representing a nearly 54% decline from its June 2022 high of $118.49 [6][7] - West Texas Intermediate has experienced a nearly 18% loss in 2025, while Brent crude has fallen more than 16% [5][6] ETF Performance - The State Street Energy Select Sector SPDR ETF (NYSEARCA: XLE), which is heavily weighted in major oil companies like ExxonMobil, Chevron, and ConocoPhillips, is anticipated to continue underperforming due to the bearish outlook on oil prices [7] - Institutional sentiment towards the ETF is weak, characterized by high short interest and a balance of buyers and sellers over the past year [7]