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4 Country ETFs That Should be Beneficiaries of $70 Oil
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Looks like the dark days in the oil patch is over. The liquid commodity jolted higher in recent trading to near $70/ barrel, hitting the highest level since November 2014. Troubles in Venezuelan oil company PDVSA as “U.S. oil major ConocoPhillips moved to take Caribbean assets of Venezuela’s state-run PDVSA to enforce a $2 billion arbitration award” mainly caused this spike.
Venezuela, which has one of the world's largest proven oil reserves, has been registering a decline in crude production in recent years. Venezuela’s oil production has halved since the early 2000s. In the first quarter, PDVSA exported 1.19 million bpd of crude from its terminals in Venezuela and the Caribbean, marking a 29% drop year over year, per Thomson Reuters data.
Also, chances of United States’ re-imposition of sanctions on Iran worked wonders for oil. If Trump imposes sanctions on Iran, its oil could be reduced by 200,000 to 300,000 bpd, per analysts at RBC Capital Markets.
Moreover, there are chances of an extended output cut deal for the coming 10 or 20 years thanks to the initiative between OPEC member nations and Russia. As per sources, OPEC top brass and the biggest exporter Saudi Arabia wants oil to push to the level of $80 or even $100. This indicates Saudi’s intension of making no changes in the ongoing output cut deal that started in January 2017 (read: Why to Consider Leveraged Oil ETFs Now).
If this $70-oil stays for long, it will definitely put some country stocks and ETFs in focus. These are the key oil producing and exporting countries with revenues earned from oil accounting for a major share of their GDP. These country ETFs bled when oil slid but could be on high gear if oil prices stage a sustained recovery. Below we highlight four such country ETFs.
Norway is among the top 10 nations famous for oil exports and with its comparatively low population, oil forms a key part of the country’s GDP. As per the U.S. Energy Information Administration (EIA), Norway is the biggest oil driller in Europe.
The most popular way to play the country is with NORW. The product tracks the MSCI Norway IMI 25/50 Index, charging investors 50 basis points a year in fees.
The ETF is concentrated on energy stocks, as these make up for nearly 30% of the portfolio. In fact, Norwegian oil giant Statoil accounts for 18.4% of the portfolio alone, suggesting heavy concentration. Thanks to a surge in oil prices, NORW may see solid trading ahead.
Canada is also among the world’s top 10 oil producers. The oil, gas and mining sector makes up for about over a quarter of the Canada’s economy. The best way to invest in Canada is through iShares MSCI Canada ETF. The fund holds just under 100 stocks in its basket. Energy makes up a huge chunk of assets accounting for over one-fifth of the total.
Market Vectors Russia ETF
Oil is seemingly the main commodity of Russia. About half of Russia’s exports in terms of value come from oil and natural gas as the country has the third-largest oil reserve in the world and the biggest natural gas reserve. This makes it clear why Russia’s economy is highly dependent on oil price movement.
Oil exports in Colombia account for about 20% of government revenues. But the amount declined to almost zero during the prolonged global oil price rout since 2014. Though the Colombia ETF GXG is heavy on Financials (47.25%), the energy sector has about 16.63% exposure. As a result, a spike in oil prices will definitely ease some revenue pressure. The fund charges about 61 bps in fees overall.
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4 Country ETFs That Should be Beneficiaries of $70 Oil
Looks like the dark days in the oil patch is over. The liquid commodity jolted higher in recent trading to near $70/ barrel, hitting the highest level since November 2014. Troubles in Venezuelan oil company PDVSA as “U.S. oil major ConocoPhillips moved to take Caribbean assets of Venezuela’s state-run PDVSA to enforce a $2 billion arbitration award” mainly caused this spike.
Venezuela, which has one of the world's largest proven oil reserves, has been registering a decline in crude production in recent years. Venezuela’s oil production has halved since the early 2000s. In the first quarter, PDVSA exported 1.19 million bpd of crude from its terminals in Venezuela and the Caribbean, marking a 29% drop year over year, per Thomson Reuters data.
Also, chances of United States’ re-imposition of sanctions on Iran worked wonders for oil. If Trump imposes sanctions on Iran, its oil could be reduced by 200,000 to 300,000 bpd, per analysts at RBC Capital Markets.
Moreover, there are chances of an extended output cut deal for the coming 10 or 20 years thanks to the initiative between OPEC member nations and Russia. As per sources, OPEC top brass and the biggest exporter Saudi Arabia wants oil to push to the level of $80 or even $100. This indicates Saudi’s intension of making no changes in the ongoing output cut deal that started in January 2017 (read: Why to Consider Leveraged Oil ETFs Now).
If this $70-oil stays for long, it will definitely put some country stocks and ETFs in focus. These are the key oil producing and exporting countries with revenues earned from oil accounting for a major share of their GDP. These country ETFs bled when oil slid but could be on high gear if oil prices stage a sustained recovery. Below we highlight four such country ETFs.
Global X MSCI Norway ETF (NORW - Free Report)
Norway is among the top 10 nations famous for oil exports and with its comparatively low population, oil forms a key part of the country’s GDP. As per the U.S. Energy Information Administration (EIA), Norway is the biggest oil driller in Europe.
The most popular way to play the country is with NORW. The product tracks the MSCI Norway IMI 25/50 Index, charging investors 50 basis points a year in fees.
The ETF is concentrated on energy stocks, as these make up for nearly 30% of the portfolio. In fact, Norwegian oil giant Statoil accounts for 18.4% of the portfolio alone, suggesting heavy concentration. Thanks to a surge in oil prices, NORW may see solid trading ahead.
iShares MSCI Canada ETF (EWC - Free Report)
Canada is also among the world’s top 10 oil producers. The oil, gas and mining sector makes up for about over a quarter of the Canada’s economy. The best way to invest in Canada is through iShares MSCI Canada ETF. The fund holds just under 100 stocks in its basket. Energy makes up a huge chunk of assets accounting for over one-fifth of the total.
Market Vectors Russia ETF
Oil is seemingly the main commodity of Russia. About half of Russia’s exports in terms of value come from oil and natural gas as the country has the third-largest oil reserve in the world and the biggest natural gas reserve. This makes it clear why Russia’s economy is highly dependent on oil price movement.
RSX is the most popular fund in the Russia ETF space. The energy sector accounts for about 40% of RSX, which charges 67 basis points as net expenses (read: Should You Buy EM ETFs Despite Trade War & Other Concerns?).
Global X MSCI Colombia ETF (GXG - Free Report)
Oil exports in Colombia account for about 20% of government revenues. But the amount declined to almost zero during the prolonged global oil price rout since 2014. Though the Colombia ETF GXG is heavy on Financials (47.25%), the energy sector has about 16.63% exposure. As a result, a spike in oil prices will definitely ease some revenue pressure. The fund charges about 61 bps in fees overall.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>