Markets have continued a trend of uncertainty in recent sessions, with disappointing reports on home sales pointing to a slowdown in economic growth. The surprisingly negative housing stats look likely to lead to a swift drop in consumer confidence, which could ripple throughout global markets. Shrinking demand and declining confidence has hit oil especially hard; prices have now dipped below $72 a barrel. Over the past three weeks, oil prices have lost 13%, plaguing the energy sector with worries over declining margins and low growth for the foreseeable future.

This dip in crude has led to cheaper prices at the pump -- much to the delight of many Americans -- with gas prices roughly 7.6 cents lower than they were just a year go. But this news comes to the dismay of many big oil companies, as well as the investors who had witnessed oil prices peak at nearly double current levels just a few short years ago. Exxon Mobil, the largest company in the world, has seen its share price lose roughly 5.1% in the last three weeks, exemplifying the problems even the largest, most stable firms face. As oil firms patiently wait for improved economic conditions, the likelihood of a fall rally seems to be fading fast for the energy sector [see Next Frontier Of ETF Investing: Long/Short Trades].

This will be put to the test later today as the Energy Department is scheduled to release an update on the oil supply figures for the U.S. Analysts estimate that 1.1 million barrels have been added to domestic crude oil stocks, while gasoline supplies have dwindled by 875,000 barrels. Should crude supplies continue their upward trend, it could help to depress already sagging oil prices.

In fact, since August began, every 1 percent drop in the markets has pushed oil prices down 2.5 to 3 percent, a trend that will seems likely continue in the short term thanks to rising supplies and minimal prospects for a market turnaround. If the report comes in under expectations, it will likely compound with the already gloomy economic situation to buckle major oil companies. But if the report shows declining inventories, suggesting that oil demand has increased, crude could see a long-awaited jump higher [also see Energy ETFs: Six Very Different Ways To Play].

With this key announcement ahead, the Energy Select Sector SPDR (NYSE: XLE) figure to be active on Wednesday. XLE is one of the largest ETFs on the market; assets under management stand at $5.7 billion. The fund's top holdings are full of big name oil companies, including Exxon Mobil (NYSE: XOM) (19.1%), Chevron (NYSE: CVX) (13.5%), and Schlumberger (NYSE: SLB) (6.7%) as the top three allocations. XLE, like the entire energy sector, has suffered harsh losses this year, with its share price dropping about 10% year to date [see also Friday The 13th Special: Three Unlucky ETFs].

If the Energy Department releases promising numbers, then this U.S. focused fund stands to make strong gains since it will suggest to many that at least some sectors of the economy are beginning to rebound. Likewise, if the report shows disappointing statistics, XLE will likely take a hit. Either way, look for shares of this energy fund to be in focus throughout Wednesday's trading session.

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Disclosure: Photo courtesy of Agência Brasil. No positions at time of writing.

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