(New throughout; Adds context on pipelines, options trading)
NEW YORK, Dec 8 (Reuters) - Price swings in the energy
market weighed on stocks and exchange-traded funds again on
Tuesday, hitting the shares of oil producers for the fifth
consecutive trading day.
Oil futures flipped between positive and negative during
U.S. morning trading, whipsawing the markets.
Oil producers' shares have slid for a week as crude prices
hit fresh lows on fears the world is running out of storage
capacity and a global supply glut intensifies. Initially down as
much as 3.3 percent, the S&P 500 oil sector .SPNY was down 1.5
percent in the early afternoon.
Markets in energy-infrastructure stocks were active as well,
as Kinder Morgan (N:KMI) KMI.N lost 6.5 percent. Investors are worried
the company will cut its dividend after years of double-digit
growth.
Exxon Mobil Corp (N:XOM) XOM.N fell 1.9 percent, Chevron Corp (N:CVX)
CVX.N was down 1 percent and Schlumberger Ltd SLB.N fell 1.2
percent.
The sell-off came as Wall Street estimates called for sharp
declines in energy companies' 2014 earnings amid mounting credit
stress and the slump in crude prices.
The SIG Oil Exploration and Production index .EPX hit its
lowest level since March 2009 before recovering to a loss of
0.1 percent. The Market Vectors Oil Services ETF OIH.P hit its
lowest point since October.
The Energy Select Sector SPDR Fund XLE.P shows a
year-to-date loss of 22 percent, making it the worst-performing
S&P 500 .SPX sector fund.
There were some notable exceptions. The ALPS Alerian MLP ETF
AMLP.P - which includes companies that pipe, store and process
oil - added 2.8 percent. Williams Companies Inc (N:WMB) WMB.N , a
specialist in natural gas infrastructure, rose 3.1 percent.
Despite benefiting from lower oil prices, airlines moved
sharply lower as Southwest Airlines LUV.N estimated its
fourth-quarter operating revenue per available seat mile to be
roughly flat to down 1 percent. Southwest's stock dropped 9.4
percent.
Other airline shares tracked by the S&P Composite 1500
Airlines Index also moved down .SPCOMALI , by 4.4 percent,
halting the December rally fueled by falling oil prices.
Traders have responded to the turmoil in energy sector
shares by taking to options on the sector ETF and individual
shares in a bid to guard against further declines.
Open interest in the Energy Select Sector SPDR Fund's
options has jumped to 1.2 million contracts, up 40 percent over
the last month.
Puts, typically used to bet on declines in the fund's
shares, outnumber calls, used for placing bullish bets, by a
1.8-to-1 margin, the highest since early October, according to
options analytics firm Trade Alert data.
"We're seeing large institutional block trades suggesting
aggressive hedging activity," Trade Alert options analyst Fred
Ruffy said.
On Tuesday, XLE puts were busy, with 53,000 contracts traded
in the first three-and-a-half-hour of trading, about twice the
normal pace. Puts betting on the fund's shares dipping below $59
by mid-January were among the most actively traded contracts.
The fund's shares have dropped 9 percent in December and
were down 46 cents to $61.78, on Tuesday.
Elsewhere in the sector, demand for protective options was
high, with more than 485,000 puts traded.
Put options on oil services company Weatherford
International Plc WFT.N , offshore oil driller Ensco ESV.N
and oil and natural gas company Anadarko Petroleum Corp (N:APC) APC.N
were among the most actively traded contracts among energy
names.