Back to top

ETF News And Commentary

Crude oil prices rebounded to the triple-digit mark at the start of the second half of the year after being stuck in a relatively tight range for much of the first half.
 
The commodity gained luster from encouraging economic data from the U.S., China and Euro zone as well as supply disruptions in the North Sea, Egypt and Libya (read: Oil ETFs Surge on Strong Data). Additionally, the commodity benefitted from the minutes of the latest Fed meeting, which suggested that QE3 tapering may not start soon.
 
Moreover, the ongoing tension in Syria has pushed the oil prices even higher this week. Brent oil hit a six month high and is currently hovering around $117 per barrel while crude oil reached its two-year high to about $112 per barrel.
 
Syria Threatens Oil Supply
 
The threat of military action in Syria could not only disrupt oil supplies in the rest of the Middle East including Nigeria, Libya and Sudan but raise alarms in the other oil exporting neighboring countries such as Iran and Iraq. Middle East accounts for about one-third of the world’s total
oil’s production.
 
As such, any supply disruptions in the region may lead to further rise in the oil prices. Moreover, rising global demand on the back of improving economies continues to act as a catalyst to the oil price surge (read: Bet on an Oil Surge with these 3 ETFs).
 
Market Impact
 
Growing concern over Syria outweighed the negative inventory data report from Energy Information Administration (EIA) for last week. According to the report, the U.S. crude stockpiles rose 3 million barrels to 362 million barrels last week (ending August 23) against the market expectation of a decline of 0.3 million barrels. 
 
The impressive jump in crude and Brent prices also had a big impact on oil ETFs this week, helping these to gains as well. Below, we have highlighted a few popular oil ETFs that could be interesting plays in the coming days, given the intensifying worries over Syria (see: all the energy ETFs here).
 
United States Brent Oil Fund (BNO - ETF report)
 
This fund provides direct exposure to the spot price of Brent crude oil on a daily basis through future contracts. It has amassed $39.7 million in its asset base and trades in small volume of roughly 35,000 shares a day.
 
The ETF charges 96 bps in annual fees and expenses. BNO added about 4.5% this week and 15.2% since the start of the second half.
 
United States Oil Fund (USO - ETF report)
 
This is the most popular and liquid ETF in the oil space with AUM of over $1.5 billion and average daily volume of over 5.7 million shares. The fund seeks to match the performance of the spot price of light sweet crude oil West Texas Intermediate (WTI). The ETF has 0.74% in expense ratio.
 
The ETF gained nearly 3% in the last three trading days and is up over 14% at the start of the second half (read: 3 Metal ETFs to Buy on the Commodity Upswing).
 
PowerShares DB Oil Fund (DBO - ETF report)
 
This product also provides exposure to crude oil through WTI futures contracts and follows the DBIQ Optimum Yield Crude Oil Index Excess Return. The fund sees solid average daily volume of more than 233,000 shares and AUM of $350 million. It charges an expense ratio of 79 bps.
 
DBO gained 1.4% so far this week and is up 8.7% in the first two months of the second half of the year.
 
iPath S&P GSCI Crude Oil Index ETN (OIL - ETF report)
 
This is an ETN option for oil investors and delivers returns through an unleveraged investment in the West Texas Intermediate (WTI) crude oil futures contract. The product follows the S&P GSCI Crude Oil Total Return Index, a subset of the S&P GSCI Commodity Index (read: 2 Commodity ETFs Offering Investors Sweet Returns).
 
The note has amassed $415 million in AUM so far and does volume of roughly 555,000 shares a day. It charges 75 bps in fees per year from investors. The ETN is up 3.4% this week and 16% since the start of the second half.

 

Bottom Line
 
Oil climbed nearly 27% from this year’s lows reached in mid April thanks to solid global data reports and dovish Fed comments. The more recent surge was propelled by political unrest in Egypt and the threat of U.S. intervention in Syria's civil war, suggesting that the trend could continue in the near future (see more in the Zacks ETF Center).
 
If it does, investors could consider any of the aforementioned oil ETFs for exposure. These could be solid ways to play the trend, and may be better performers compared to some of the sluggish oil companies for a continued run in crude oil prices in the near term.
 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Please login to Zacks.com or register to post a comment.

If you wish to go to ZacksFunds.com, click OK. If you do not, click Cancel.

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UTD THERAPE… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%