Lower expense ratios mean more of your investment return is retained. Compare expense ratios across different oil ETFs, but also consider the ETF’s tracking performance and trading volume.. Finally, we have leveraged oil ETFs, which track the price of crude oil or a specific oil sector, and has a certain performance multiplier. Add to that the tug-of-war between environmental concerns, climate policy, and old-school fossil fuel demand, and it’s a complex puzzle.
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- This list is regularly updated to include newly launched funds.
- PXI tries to capture trends and ride the wave – perfect if you like technicals over fundamentals.
- These categories of ETFs do not hold oil company stocks.
- Balance your selections with an investment in a total market index fund in case the oil industry continues to deal with oversupply and low prices.
WTI is a US-based benchmark, while Brent is an international benchmark. Their prices can differ due to supply, demand, and logistical factors. The VanEck Vectors Oil Services ETF focuses entirely on the oil industry of the United States by tracking the MVIS U.S. Listed Oil Services 25 Index. Benzinga compiles a list of oil ETFs on the move every day. Check out oil ETF movers we’re watching so that you can get in on the action at the right time.
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With all that excess cash, they’ve ramped up shareholder returns through stock buybacks and, more notably, dividends. Energy giants routinely offer dividend yields that far surpass the broader market, making energy ETFs an appealing option for income-focused investors. Some oil ETFs, like USL, are designed to mitigate contango, making them potentially more suitable for longer-term investing. However, oil prices are inherently volatile, so consider your risk tolerance. Several factors are contributing to the underperformance of natural gas ETFs in 2024.
Best-performing oil ETFs
Energy producers who sell those inputs can benefit from higher prices and pricing power, making them a rare winner when everything else is getting squeezed. But that’s just one of many ways energy ETFs can fit into your portfolio.
- Upstream activities in the oil and gas industry involve the exploration, drilling, and production of crude oil and natural gas.
- Crude oil ETFs track the price of the unrefined, crude oil.
- We also excluded leveraged and inverse energy ETFs, which are generally geared toward short-term trading, not long-term investing.
- The SPDR S&P Oil & Gas Equipment & Services ETF tracks the S&P Oil & Gas Equipment & Services Select Industry Index and currently has about $286 million in assets.
- Oil industry ETFs provide investors with an opportunity to tap into the largest commodity market in the world.
How to invest in crude oil using ETFs/ETCs
Ensure sufficient trading volume for easy buying and selling. Compare the performance against oil price benchmarks, but consider the tracking error. Within InvestingPro you can find and compare the performance across ETF benchmarks. Below, we’ll examine a selection of popular and well-regarded Oil ETFs, highlighting their key characteristics to help you make informed investment decisions. We will consider factors such as expense ratios, top holdings, and reasons to consider each ETF. The Alerian MLP ETF is a fund that allows investors to target energy infrastructure midstream master limited partnerships (MLPs).
The oil ETFs we track are commodities ETFs, meaning they track the price of oil through benchmarks such as the Brent Crude Oil or West Texas Intermediate benchmarks. These categories of ETFs do not hold oil company stocks. Our screen also may include oil ETNs (more on that below). NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor.
Please note that, whilst we endeavour to provide accurate and useful information, the Content may not be wholly accurate or up-to-date and is subject to change, often at very short notice. Small-caps can shoot up quickly when oil prices are on the rise – but they can also tumble just as fast. This is the granddaddy of oil ETFs – a firm favourite among investors.
There’s more than one way to structure an energy index, and the Fidelity MSCI Energy Index ETF (FENY) – VDE’s closest competitor – tracks the MSCI USA IMI Energy Index. It currently holds just over 100 energy stocks in a market cap-weighted portfolio. As expected, Exxon Mobil and Chevron dominate the top spots. Investing in Oil ETFs is generally considered a sound strategy for investors seeking broad market exposure, diversification, and relatively low risk. However, it’s crucial to assess your financial goals, risk tolerance, and time horizon before investing.
The best oil ETFs/ETCs
This makes the SPDR S&P Oil & Gas Equipment & Services ETF a less risky option when compared to other oil ETFs on the market. The United States Oil Fund is an inexpensive ETF that tracks the price of West Texas Intermediate Light Sweet Crude Oil. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. More concentrated than VDE or XLE, so you get greater exposure to fast-growing U.S. producers – ideal if you’re optimistic about American shale. This ETF gives you that high-risk, high-reward exposure – but with a safety net through diversification. A newsletter built for market enthusiasts by market enthusiasts.
Oilfield services tend to boom when production is expanding. OIH gives you leveraged exposure to drilling and engineering companies riding the oil wave. Momentum investing in energy is risky but can be rewarding. PXI tries to capture trends and ride the wave – perfect if you like technicals over fundamentals.
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Rather than storing barrels of oil yourself, crude oil ETFs allow you to invest in oil price contracts, futures, and options, which are a much more efficient and safer way to invest in oil. The oil industry isn’t going away anytime soon, even with the global shift toward clean energy. In fact, the International Energy Agency (IEA) still expects oil demand to rise through 2030. Great for long-term investors who want solid exposure to the whole energy sector – not just the mega caps.
Investors will want to consider having some exposure to the oil market in their portfolio. Oil ETFs make getting into the sector easy by allowing investors to potentially profit from the sector’s upside by holding either a basket of oil stocks or an ETF focused on crude oil prices. There are several top oil stock ETFs, giving investors many easy ways to add some oil market exposure to their portfolios. The fund uses a market-weight strategy, so assets are highly concentrated at the top. Two of the world’s largest integrated energy companies by market cap comprise more than 40% of the fund’s total holdings. Oil ETFs are baskets of securities that track the price of oil as a commodity, or contain oil stocks.
These companies make money by providing midstream services such as operating pipelines or liquefied natural gas (LNG) export facilities. The MoneyMagpie Site is intended for reference purposes only and use of the Site and/or the Content is entirely at your own risk. You should always carry out your own research and/or take specific professional advice before choosing any financial products or services or undertaking any business or financial venture.
The International Energy Agency (IEA) expects oil demand to continue growing through 2030. Oil companies should be able to increase their production and cash flow to meet demand, giving them the funds to provide value to their shareholders through share repurchases and dividend payments. Investing in oil stocks directly can be like trying to predict the British weather. One minute the sun’s shining (aka prices are booming), the next you’re caught in a downpour of falling profits and political drama.