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Will 2021 be the Best Year for Energy ETFs in Three Decades?
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Energy stocks are on the course of their best year in more than three decades, per a CNBC article. The group is still up more than 40% for the year. The S&P 500 is up nearly 12% this year. Crude prices are up about 80% over the past year as the demand outlook continues to improve with economic reopening.
The coronavirus vaccine rollout is gradually helping control the spread of the outbreak across the globe and this has boded well for the energy sector. The jump in oil prices came despite the rising virus cases in India – one of the key consumers of oil (read: MLP ETFs At One-Year High: Can the Rally Sustain?).
Global oil demand is set to return to pre-pandemic levels by the end of 2022, rising 5.4 mb/d in 2021 and a further 3.1 mb/d next year. The OECD makes up for 1.3 mb/d of 2022 growth while non-OECD countries makes up for 1.8 mb/d. Jet and kerosene demand will see the greatest increase (+1.5 mb/d y-o-y), followed by gasoline (+660 kb/d y-o-y) and gasoil/diesel (+520 kb/d y-o-y).
Oil demand could exceed pre-pandemic levels by the end of 2022, per International Energy Agency. Moving on, the Organization of the Petroleum Exporting Countries and its production allies, together known as OPEC+, has added to the optimism in oil demand. It expects demand to rise on global economic recovery.
Accordingly, the group has decided to raise production by 841,000 barrels per day (bpd) in July after increases in May and June, per a Bloomberg article. Resultantly, oil prices saw continued gains and rose to the highest level since October 2018.
Crude oil prices have also been rising lately as the market feared that the U.S.-Iran nuclear talks may be stalled after hardliner Ebrahim Raisi won the Iranian presidential election. Bank of America’s newest pricing outlook suggests that Brent crude could touch a $100-per-barrel next year as pent-up oil demand will be opened up on a post-pandemic world. Plus, a subdued greenback has led to the strength in the commodity investing.
Winning Energy ETFs in Focus
Against the bullish backdrop of the energy sector, let’s take a look at some energy ETFs that have been the top performers this year.
Invesco S&P SmallCap Energy ETF (PSCE - Free Report) – Up 82.9% YTD
The underlying S&P SmallCap 600 Capped Energy Index is designed to measure the overall performance of common stocks of US energy companies. The fund charges 29 bps in fees.
First Trust Natural Gas ETF (FCG - Free Report) – Up 81.9% YTD
The underlying ISE-Revere Natural Gas Index is an equal-weighted index comprised of exchange-listed companies that derive a substantial portion of their revenues from the exploration and production of natural gas. The fund charges 60 bps in fees.
Invesco Dynamic Energy Exploration & Production ETF (PXE - Free Report) – Up 81.3% YTD
The underlying Dynamic Energy Exploration & Production Intellidex Index is composed of stocks of 30 U.S. companies involved in the exploration and production of natural resources used to produce energy. The fund charges 63 bps in fees.
Invesco DWA Energy Momentum ETF (PXI - Free Report) – Up 74.1% YTD
The underlying DWA Energy Technical Leaders Index identifies companies that are showing relative strength, and are composed of at least 30 common stocks from a universe of approximately 3,000 common stocks traded on US exchanges. The fund charges 60 bps in fees.
VanEck Vectors Unconventional Oil & Gas ETF – Up 70.6% YTD
The underlying MVIS Global Unconventional Oil & Gas Index tracks the overall performance of companies involved in the exploration, development, extraction, and/or production of unconventional oil and natural gas. The fund charges 54 bps in fees.
SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) – Up 65.3%
The underlying S&P Oil & Gas Exploration & Production Select Industry Index represents the oil and gas exploration and production sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the US common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Oil & Gas Exploration Index is a modified equal weight index. The fund charges 35 bps in fees.
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Will 2021 be the Best Year for Energy ETFs in Three Decades?
Energy stocks are on the course of their best year in more than three decades, per a CNBC article. The group is still up more than 40% for the year. The S&P 500 is up nearly 12% this year. Crude prices are up about 80% over the past year as the demand outlook continues to improve with economic reopening.
The coronavirus vaccine rollout is gradually helping control the spread of the outbreak across the globe and this has boded well for the energy sector. The jump in oil prices came despite the rising virus cases in India – one of the key consumers of oil (read: MLP ETFs At One-Year High: Can the Rally Sustain?).
Global oil demand is set to return to pre-pandemic levels by the end of 2022, rising 5.4 mb/d in 2021 and a further 3.1 mb/d next year. The OECD makes up for 1.3 mb/d of 2022 growth while non-OECD countries makes up for 1.8 mb/d. Jet and kerosene demand will see the greatest increase (+1.5 mb/d y-o-y), followed by gasoline (+660 kb/d y-o-y) and gasoil/diesel (+520 kb/d y-o-y).
Oil demand could exceed pre-pandemic levels by the end of 2022, per International Energy Agency. Moving on, the Organization of the Petroleum Exporting Countries and its production allies, together known as OPEC+, has added to the optimism in oil demand. It expects demand to rise on global economic recovery.
Accordingly, the group has decided to raise production by 841,000 barrels per day (bpd) in July after increases in May and June, per a Bloomberg article. Resultantly, oil prices saw continued gains and rose to the highest level since October 2018.
Crude oil prices have also been rising lately as the market feared that the U.S.-Iran nuclear talks may be stalled after hardliner Ebrahim Raisi won the Iranian presidential election. Bank of America’s newest pricing outlook suggests that Brent crude could touch a $100-per-barrel next year as pent-up oil demand will be opened up on a post-pandemic world. Plus, a subdued greenback has led to the strength in the commodity investing.
Winning Energy ETFs in Focus
Against the bullish backdrop of the energy sector, let’s take a look at some energy ETFs that have been the top performers this year.
Invesco S&P SmallCap Energy ETF (PSCE - Free Report) – Up 82.9% YTD
The underlying S&P SmallCap 600 Capped Energy Index is designed to measure the overall performance of common stocks of US energy companies. The fund charges 29 bps in fees.
First Trust Natural Gas ETF (FCG - Free Report) – Up 81.9% YTD
The underlying ISE-Revere Natural Gas Index is an equal-weighted index comprised of exchange-listed companies that derive a substantial portion of their revenues from the exploration and production of natural gas. The fund charges 60 bps in fees.
Invesco Dynamic Energy Exploration & Production ETF (PXE - Free Report) – Up 81.3% YTD
The underlying Dynamic Energy Exploration & Production Intellidex Index is composed of stocks of 30 U.S. companies involved in the exploration and production of natural resources used to produce energy. The fund charges 63 bps in fees.
Invesco DWA Energy Momentum ETF (PXI - Free Report) – Up 74.1% YTD
The underlying DWA Energy Technical Leaders Index identifies companies that are showing relative strength, and are composed of at least 30 common stocks from a universe of approximately 3,000 common stocks traded on US exchanges. The fund charges 60 bps in fees.
VanEck Vectors Unconventional Oil & Gas ETF – Up 70.6% YTD
The underlying MVIS Global Unconventional Oil & Gas Index tracks the overall performance of companies involved in the exploration, development, extraction, and/or production of unconventional oil and natural gas. The fund charges 54 bps in fees.
SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) – Up 65.3%
The underlying S&P Oil & Gas Exploration & Production Select Industry Index represents the oil and gas exploration and production sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the US common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Oil & Gas Exploration Index is a modified equal weight index. The fund charges 35 bps in fees.
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 >>