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The energy sector has outperformed in the initial weeks of 2022 as oil prices are surging. Notably, oil prices skyrocketed to seven-year highs on supply disruptions and unprecedented demand. The latest leg of the rally was driven by the possible supply disruption that was added to an already tight supply outlook after attacks in the Mideast Gulf.
This has pushed many energy ETFs to new 52-week highs. Some of these include Energy Select Sector SPDR (XLE - Free Report) , Vanguard Energy ETF (VDE - Free Report) , iShares U.S. Energy ETF (IYE - Free Report) , Invesco Dynamic Energy Exploration & Production ETF (PXE - Free Report) and Invesco DWA Energy Momentum ETF (PXI - Free Report) .
Supply concerns have risen this week on geopolitical issues. Yemen's Houthi group attacked the United Arab Emirates, escalating hostilities between the Iran-aligned group and a Saudi Arabian-led coalition, adding to ongoing supply tightness. Rising tensions between Ukraine and OPEC+ member Russia and an outage on a pipeline from Iraq to Turkey also increased concerns about an already tight supply outlook. Notably, United Arab Emirates is the OPEC`s third-largest oil producer and Russia is the world’s second-largest producer (read: 5 Leveraged Energy ETFs to Play Geopolitical Tensions in Gulf).
The geopolitical tensions came at a time when OPEC, Russia and their allies, together known as OPEC+, are already having difficulty meeting their target of adding 400,000 barrels per day of supply each month.
On the demand side, ebbing concerns over the Omicron variant and rising jet fuel consumption are bolstering the demand. Increasing COVID-19 vaccination rates, loosening pandemic-related restrictions, and a growing economy will continue to support the demand for energy.
The combination of factors is expected to continue pushing oil prices higher and thus the energy sector. Added to the strong momentum is the state of backwardation in the oil futures market, where later-dated contracts are cheaper than near-term contracts. This signals that the oil market is tightening and demand is robust, paving the way for an oil rally. This trend is likely to persist, at least in the near term, acting as the biggest catalyst for the commodity.
Energy Select Sector SPDR is the largest and the most-popular ETF in the energy space, with AUM of $31.2 billion and an average daily volume of 29 million shares per day. It offers exposure to the broad energy space and follows the Energy Select Sector Index. Energy Select Sector SPDR holds 21 securities in its basket with heavy concentration on the top two firms.
Energy Select Sector SPDR charges 2 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.
Vanguard Energy ETF provides exposure to a basket of 103 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. It is also concentrated on the top two firms (read: Rotate to Cyclical Sectors With These Top-Ranked ETFs).
Vanguard Energy ETF has amassed $6.9 billion in its asset base and sees a good volume of about 1.5 million shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a High risk outlook.
iShares U.S. Energy ETF tracks the Dow Jones U.S. Oil & Gas Index, giving investors exposure to U.S. companies that produce and distribute oil and gas. It holds 37 stocks in its basket with heavy concentration on the top two firms.
iShares U.S. Energy ETF charges 41 bps in fees per year from its investors. It has AUM of $2.8 billion and an average daily volume of about 2.4 million shares. The product has a Zacks ETF Rank #3 with a High risk outlook.
Invesco Dynamic Energy Exploration & Production ETF (PXE - Free Report)
Invesco Dynamic 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 (read: 5 Energy ETFs Making the Most of Oil Price Surge).
Holding 32 stocks in its basket, Invesco Dynamic Energy Exploration & Production ETF has amassed $166 million in its asset base and charges 63 bps in annual fees. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
Invesco DWA Energy Momentum ETF tracks the Dorsey Wright Energy Technical Leaders Index, which is designed to identify companies that are showing relative strength (momentum). The fund has 46 stocks in its basket, each making up for less than 5.1% of assets, and AUM of $154.1 million.
Invesco DWA Energy Momentum ETF charges 60 bps in annual fees and trades in a good volume of 140,000 shares a day on average. PXI has a Zacks ETF Rank #3 with a High risk outlook.
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Energy ETFs Hitting New 52-Week High
The energy sector has outperformed in the initial weeks of 2022 as oil prices are surging. Notably, oil prices skyrocketed to seven-year highs on supply disruptions and unprecedented demand. The latest leg of the rally was driven by the possible supply disruption that was added to an already tight supply outlook after attacks in the Mideast Gulf.
This has pushed many energy ETFs to new 52-week highs. Some of these include Energy Select Sector SPDR (XLE - Free Report) , Vanguard Energy ETF (VDE - Free Report) , iShares U.S. Energy ETF (IYE - Free Report) , Invesco Dynamic Energy Exploration & Production ETF (PXE - Free Report) and Invesco DWA Energy Momentum ETF (PXI - Free Report) .
Supply concerns have risen this week on geopolitical issues. Yemen's Houthi group attacked the United Arab Emirates, escalating hostilities between the Iran-aligned group and a Saudi Arabian-led coalition, adding to ongoing supply tightness. Rising tensions between Ukraine and OPEC+ member Russia and an outage on a pipeline from Iraq to Turkey also increased concerns about an already tight supply outlook. Notably, United Arab Emirates is the OPEC`s third-largest oil producer and Russia is the world’s second-largest producer (read: 5 Leveraged Energy ETFs to Play Geopolitical Tensions in Gulf).
The geopolitical tensions came at a time when OPEC, Russia and their allies, together known as OPEC+, are already having difficulty meeting their target of adding 400,000 barrels per day of supply each month.
On the demand side, ebbing concerns over the Omicron variant and rising jet fuel consumption are bolstering the demand. Increasing COVID-19 vaccination rates, loosening pandemic-related restrictions, and a growing economy will continue to support the demand for energy.
The combination of factors is expected to continue pushing oil prices higher and thus the energy sector. Added to the strong momentum is the state of backwardation in the oil futures market, where later-dated contracts are cheaper than near-term contracts. This signals that the oil market is tightening and demand is robust, paving the way for an oil rally. This trend is likely to persist, at least in the near term, acting as the biggest catalyst for the commodity.
We profiled the above-mentioned ETFs below:
Energy Select Sector SPDR (XLE - Free Report)
Energy Select Sector SPDR is the largest and the most-popular ETF in the energy space, with AUM of $31.2 billion and an average daily volume of 29 million shares per day. It offers exposure to the broad energy space and follows the Energy Select Sector Index. Energy Select Sector SPDR holds 21 securities in its basket with heavy concentration on the top two firms.
Energy Select Sector SPDR charges 2 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.
Vanguard Energy ETF (VDE - Free Report)
Vanguard Energy ETF provides exposure to a basket of 103 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. It is also concentrated on the top two firms (read: Rotate to Cyclical Sectors With These Top-Ranked ETFs).
Vanguard Energy ETF has amassed $6.9 billion in its asset base and sees a good volume of about 1.5 million shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a High risk outlook.
iShares U.S. Energy ETF (IYE - Free Report)
iShares U.S. Energy ETF tracks the Dow Jones U.S. Oil & Gas Index, giving investors exposure to U.S. companies that produce and distribute oil and gas. It holds 37 stocks in its basket with heavy concentration on the top two firms.
iShares U.S. Energy ETF charges 41 bps in fees per year from its investors. It has AUM of $2.8 billion and an average daily volume of about 2.4 million shares. The product has a Zacks ETF Rank #3 with a High risk outlook.
Invesco Dynamic Energy Exploration & Production ETF (PXE - Free Report)
Invesco Dynamic 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 (read: 5 Energy ETFs Making the Most of Oil Price Surge).
Holding 32 stocks in its basket, Invesco Dynamic Energy Exploration & Production ETF has amassed $166 million in its asset base and charges 63 bps in annual fees. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
Invesco DWA Energy Momentum ETF (PXI - Free Report)
Invesco DWA Energy Momentum ETF tracks the Dorsey Wright Energy Technical Leaders Index, which is designed to identify companies that are showing relative strength (momentum). The fund has 46 stocks in its basket, each making up for less than 5.1% of assets, and AUM of $154.1 million.
Invesco DWA Energy Momentum ETF charges 60 bps in annual fees and trades in a good volume of 140,000 shares a day on average. PXI has a Zacks ETF Rank #3 with a High risk outlook.