Back to top

Image: Bigstock

Oil Rallies Amid Russia-Ukraine Crisis: ETFs to Bet on

Read MoreHide Full Article

Oil prices have been rallying amid the Russia-Ukraine geopolitical crisis. The West Texas Intermediate (WTI) has increased 7% to $98.53 per barrel. Also, the global benchmark Brent crude oil has risen 7.3% to $103.91 per barrel, surpassing the $100 level for the first time since 2014.

According to the latest updates, Russian President Vladimir Putin has launched a military operation in Ukraine on early Feb 24. In response, Ukraine's President Volodymyr Zelensky has imposed martial law across the country. Going on, Ukraine's Interior Ministry has informed about the beginning of Russia's invasion. Several reports are highlighting Russia’s troops crossing the border and explosions in various cities, including the capital Kyiv.

Russia has begun an all-out invasion of Ukraine by all the routes, including land, air and sea. It is considered the biggest attack launched by a state against another in Europe since World War II, per a Reuters article.

Russia’s move is leading to a rise in oil prices as it is among the world’s largest suppliers of oil and natural gas. In this regard, UBS analyst Giovanni Staunovo has said that "Russia is the third largest oil producer, and second largest oil exporter. Given low inventories and dwindling spare capacity, the oil market cannot afford large supply disruptions," according to the same article mentioned above.

Also, market experts believe Brent will remain above $100 per barrel unless other sources of supplies are made available from OPEC, U.S. shale, or Iran.

President Joe Biden has already informed about imposing sanctions on the major Russian bank VEB as well as its military bank, the country’s sovereign debt and on three wealthy individuals (two of them are the sons of high-ranking Russian government officials). According to the sources, the imposition of bank sanctions will forbid American financial institutions from dealing out transactions for VEB along with Russia’s military bank, PSB.

Regarding the sanctions on sovereign debt, President Biden has mentioned that “That means we’ve cut off Russia’s government from Western financing. It can no longer raise money from the West and cannot trade its new debt on our markets, or European markets either,” per a CNBC article.

Taking their stand against Russia, the U.K. has also announced the first tranche of economic sanctions aiming at five Russian Banks — Rossiya, IS Bank, General Bank, Promsvyazbank and the Black Sea Bank. Going on, the U.K. is imposing sanctions on three very wealthy individuals, namely, Gennady Timchenko, Boris Rotenberg and Igor Rotenberg.

Oil ETFs That Might Gain

There are other factors as well supporting the oil prices. The coronavirus vaccine rollout is gradually helping control the outbreak's spread across the globe. The optimism surrounding the gradual reopening of global economies and increasing demand is painting a rosy picture for cyclical sectors.

Against this backdrop, investors can take a closer look at the oil commodity space and its related ETFs (see all Energy ETFs here):

United States Oil Fund (USO - Free Report)

The United States Oil Fund’s investment objective is for the daily changes, in percentage terms, of its shares’ net asset value (NAV) to reflect the daily changes, in percentage terms, of the spot price of light sweet crude oil delivered to Cushing, OK, as measured by the daily changes in the Benchmark Oil Futures Contract (read: 5 Sector ETFs to Play if Russia-Ukraine Geopolitics Rule).

AUM: $2.66 billion

Total Expense Ratio: 0.83%

Invesco DB Oil Fund (DBO - Free Report)

The fund tracks changes, whether positive or negative, in the level of the DBIQ Optimum Yield Crude Oil Index Excess Return plus the interest income from the holdings of primarily U.S. Treasury securities and money-market income-less fund’s expenses.

AUM: $490.5 million

Total Expense Ratio: 0.77%

United States Brent Oil Fund (BNO - Free Report)

The fund tracks the daily price movement of Brent crude oil (read: 5 Leveraged Energy ETFs to Play Russia-Ukraine Tensions).

AUM: $251.7 million

Total Expense Ratio: 1.13%

United States 12 Month Oil Fund (USL - Free Report)

The fund replicates, with possible accuracy, the price movements of West Texas Intermediate light, sweet crude oil (read: 3 Oil ETFs to Ride the Crude Rally).

AUM: $148.6 million

Total Expense Ratio: 0.88%