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Energy has been the best-performing sector of March, driven by a sharp rise in oil prices. The energy sector is up 9.2%, compared with a 3% gain for the S&P 500. The rally underscores the broadening rally this year beyond the technology sector.
Given this, we have highlighted the five best-performing ETFs from the sector that led the market last month. These are iShares U.S. Oil Equipment & Services ETF (IEZ - Free Report) , iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report) , Texas Capital Texas Oil Index ETF (OILT - Free Report) , Invesco Energy Exploration & Production ETF (PXE - Free Report) and VanEck Vectors Oil Services ETF (OIH - Free Report) .
Oil prices spiked in double digits last month on tightening supply conditions and the prospect of higher demand. Increased Ukrainian drone strikes, falling inventories, and continued production cuts from OPEC+ have threatened oil supply. Ukraine has increased drone strikes on Russian oil infrastructure this year, with at least seven refineries targeted last month. The attack has shut down nearly 7% or 370,500 barrels per day (bpd) of Russia's refining capabilities, as reported by Reuters (read: Energy ETFs Hit New 52-Week High on Oil Price Surge).
Early last month, the oil cartel OPEC+ extended the voluntary output reductions of 2.2 million barrels per day until the second quarter.
Additionally, the demand for oil is improving. The IEA revised its 2024 oil demand outlook upward for the fourth time since November, citing disruptions in Red Sea shipping due to Houthi attacks. The forecast indicates an increase in global demand by 110,000 bpd from the previous projection to 1.3 million bpd. The improved forecast came from signs of economic growth in China and the United States. Notably, manufacturing activity in China expanded for the first time in six months in March, bolstering oil demand in the world's largest importer of crude. In the United States, manufacturing activity unexpectedly expanded in March for the first time since September 2022.
Oil is also gaining support from declining crude exports from Saudi Arabia and Iraq. Further, the prospect of rate cuts this year by the Fed is driving oil prices higher. Lower interest rates tend to lower the expense of purchasing goods and services, potentially stimulating economic expansion and driving up demand for oil.
However, a higher dollar is weighing on the oil price. This is because a stronger dollar makes oil more expensive for investors holding other currencies, dampening demand.
Here, we have profiled the abovementioned ETFs:
iShares U.S. Oil Equipment & Services ETF (IEZ - Free Report) – Up 12.8%
iShares U.S. Oil Equipment & Services ETF offers exposure to U.S. companies that provide equipment and services for oil exploration and extraction. It follows the Dow Jones U.S. Select Oil Equipment & Services Index, holding 31 stocks in its basket (read: ETF Strategies to Play Hot Inflation Data).
iShares U.S. Oil Equipment & Services ETF has amassed $289.3 million in its asset base while charging 40 bps in fees per year from investors. It trades in a volume of 309,000 shares a day on average and has a Zacks ETF Rank #3 with a High risk outlook.
iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report) – Up 12.8%
iShares U.S. Oil & Gas Exploration & Production ETF provides exposure to U.S. companies that are engaged in the exploration, production and distribution of oil and gas. It tracks the Dow Jones U.S. Select Oil Exploration & Production Index and holds 47 stocks in its basket.
iShares U.S. Oil & Gas Exploration & Production ETF has an AUM of $759.6 million and trades in an average daily volume of 117,000 shares. The fund charges 40 bps in fees per year and has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
Texas Capital Texas Oil Index ETF (OILT - Free Report) – Up 12.3%
Texas Capital Texas Oil Index ETF provides exposure to companies that extract oil and gas within Texas by tracking the Alerian Texas Weighted Oil and Gas Index. It holds 36 stocks in its basket, with a moderate concentration in the top firms.
Texas Capital Texas Oil Index ETF has accumulated $13.9 million in its asset base since its inception in December. It charges 35 bps in annual fees and trades in an average daily volume of 1,000 shares.
Invesco Energy Exploration & Production ETF (PXE - Free Report) – Up 12.2%
Invesco Energy Exploration & Production ETF follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies involved in the exploration and production of natural resources used to produce energy based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value.
Holding 32 stocks in its basket, Invesco Energy Exploration & Production ETF has amassed $146.8 million in its asset base and charges 60 bps in annual fees. It trades in a volume of 35,000 shares and has a Zacks ETF Rank #2 with a High risk outlook (read: Top-Ranked Energy ETFs to Ride the Rebound in Oil Prices).
VanEck Vectors Oil Services ETF tracks the MVIS U.S. Listed Oil Services 25 Index, which offers exposure to companies involved in oil services to the upstream oil sector, including oil equipment, oil services or oil drilling. It holds 26 stocks in its basket, with double-digit concentration on the top three firms.
With an AUM of $2.2 billion, VanEck Vectors Oil Services ETF charges 35 bps in annual fees. The product trades in an average daily volume of 387,000 shares and has a Zacks ETF Rank #2 with a High risk outlook.
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5 Top ETFs of the Best-Performing Sector of March
Energy has been the best-performing sector of March, driven by a sharp rise in oil prices. The energy sector is up 9.2%, compared with a 3% gain for the S&P 500. The rally underscores the broadening rally this year beyond the technology sector.
Given this, we have highlighted the five best-performing ETFs from the sector that led the market last month. These are iShares U.S. Oil Equipment & Services ETF (IEZ - Free Report) , iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report) , Texas Capital Texas Oil Index ETF (OILT - Free Report) , Invesco Energy Exploration & Production ETF (PXE - Free Report) and VanEck Vectors Oil Services ETF (OIH - Free Report) .
Oil prices spiked in double digits last month on tightening supply conditions and the prospect of higher demand. Increased Ukrainian drone strikes, falling inventories, and continued production cuts from OPEC+ have threatened oil supply. Ukraine has increased drone strikes on Russian oil infrastructure this year, with at least seven refineries targeted last month. The attack has shut down nearly 7% or 370,500 barrels per day (bpd) of Russia's refining capabilities, as reported by Reuters (read: Energy ETFs Hit New 52-Week High on Oil Price Surge).
Early last month, the oil cartel OPEC+ extended the voluntary output reductions of 2.2 million barrels per day until the second quarter.
Additionally, the demand for oil is improving. The IEA revised its 2024 oil demand outlook upward for the fourth time since November, citing disruptions in Red Sea shipping due to Houthi attacks. The forecast indicates an increase in global demand by 110,000 bpd from the previous projection to 1.3 million bpd. The improved forecast came from signs of economic growth in China and the United States. Notably, manufacturing activity in China expanded for the first time in six months in March, bolstering oil demand in the world's largest importer of crude. In the United States, manufacturing activity unexpectedly expanded in March for the first time since September 2022.
Oil is also gaining support from declining crude exports from Saudi Arabia and Iraq. Further, the prospect of rate cuts this year by the Fed is driving oil prices higher. Lower interest rates tend to lower the expense of purchasing goods and services, potentially stimulating economic expansion and driving up demand for oil.
However, a higher dollar is weighing on the oil price. This is because a stronger dollar makes oil more expensive for investors holding other currencies, dampening demand.
Here, we have profiled the abovementioned ETFs:
iShares U.S. Oil Equipment & Services ETF (IEZ - Free Report) – Up 12.8%
iShares U.S. Oil Equipment & Services ETF offers exposure to U.S. companies that provide equipment and services for oil exploration and extraction. It follows the Dow Jones U.S. Select Oil Equipment & Services Index, holding 31 stocks in its basket (read: ETF Strategies to Play Hot Inflation Data).
iShares U.S. Oil Equipment & Services ETF has amassed $289.3 million in its asset base while charging 40 bps in fees per year from investors. It trades in a volume of 309,000 shares a day on average and has a Zacks ETF Rank #3 with a High risk outlook.
iShares U.S. Oil & Gas Exploration & Production ETF (IEO - Free Report) – Up 12.8%
iShares U.S. Oil & Gas Exploration & Production ETF provides exposure to U.S. companies that are engaged in the exploration, production and distribution of oil and gas. It tracks the Dow Jones U.S. Select Oil Exploration & Production Index and holds 47 stocks in its basket.
iShares U.S. Oil & Gas Exploration & Production ETF has an AUM of $759.6 million and trades in an average daily volume of 117,000 shares. The fund charges 40 bps in fees per year and has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
Texas Capital Texas Oil Index ETF (OILT - Free Report) – Up 12.3%
Texas Capital Texas Oil Index ETF provides exposure to companies that extract oil and gas within Texas by tracking the Alerian Texas Weighted Oil and Gas Index. It holds 36 stocks in its basket, with a moderate concentration in the top firms.
Texas Capital Texas Oil Index ETF has accumulated $13.9 million in its asset base since its inception in December. It charges 35 bps in annual fees and trades in an average daily volume of 1,000 shares.
Invesco Energy Exploration & Production ETF (PXE - Free Report) – Up 12.2%
Invesco Energy Exploration & Production ETF follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies involved in the exploration and production of natural resources used to produce energy based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value.
Holding 32 stocks in its basket, Invesco Energy Exploration & Production ETF has amassed $146.8 million in its asset base and charges 60 bps in annual fees. It trades in a volume of 35,000 shares and has a Zacks ETF Rank #2 with a High risk outlook (read: Top-Ranked Energy ETFs to Ride the Rebound in Oil Prices).
VanEck Vectors Oil Services ETF (OIH - Free Report) – Up 11.9%
VanEck Vectors Oil Services ETF tracks the MVIS U.S. Listed Oil Services 25 Index, which offers exposure to companies involved in oil services to the upstream oil sector, including oil equipment, oil services or oil drilling. It holds 26 stocks in its basket, with double-digit concentration on the top three firms.
With an AUM of $2.2 billion, VanEck Vectors Oil Services ETF charges 35 bps in annual fees. The product trades in an average daily volume of 387,000 shares and has a Zacks ETF Rank #2 with a High risk outlook.