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The energy space has been undoubtedly the best-performing S&P 500 sector so far in 2022. The S&P 500 Energy Index has been up 50.3% year to date against the broader index’s 16.6% decline.
The strength in the energy space clearly attracted investor’s attention. Various factors have been driving this upside in the sector for a while. Reopening global economies from the pandemic-led restrictions and the accelerated coronavirus vaccine rollout that help tame the outbreak supported the sector. Growing demand from the rising economic activities is making the sector’s prospects bright. Adding to these factors is the macroeconomic element like the Russia-Ukraine war crisis that is resulting in the rally in crude oil.
This attack is bumping up oil prices as Russia is the world’s second-largest oil producer. European refineries procure most of their crude oil supplies from Russia. Notably, the country provides about two-fifths of its natural gas supply to Europe. In fact, Russia emerged as the largest natural gas and oil supplier to the European Union in 2021. Crude oil is turning out to be the beneficiary of this already tight demand and supply market. In fact, Brent crude oil futures prices hit $139 a barrel in March 2022, witnessing its highest level since 2008.
The trend is expected to remain as the European Union is in talks to agree on a ban on the Russian oil imports. U.S. gasoline demand is also soon going to shoot up as the Memorial Day weekend will mark the beginning of the U.S. summer driving season. According to SPI Asset Management managing partner Stephen Innes, "Oil prices are supported as gasoline markets remain tight amid solid demand heading into the peak U.S. driving season. Refineries are typically in ramp-up mode to feed U.S. drivers' unquenching thirst at the pump," as mentioned in a Reuters article.
Leveraged Oil-Energy ETFs Up More Than 80% YTD
Here we highlight some leveraged oil-energy ETFs that have been up more than 80% so far in 2022.
However, investors need to note that these products are extremely volatile and suitable only for short-term traders. These trades can cause huge losses compared to the traditional funds during turbulent market conditions. Market participants may enjoy higher returns in a short period of time, provided the trend remains in favor, largely due to the compounding effect of these products. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures.
MicroSectors U.S. Big Oil Index 3X Leveraged ETNs (NRGU - Free Report) — up 216.2% year to date
The return on the MicroSectors U.S. Big Oil Index 3X Leveraged ETNs (3X ETNs) is linked to three times leveraged participation in the performance of the Solactive MicroSectors U.S. Big Oil Index, compounded daily, minus the applicable fees. With an AUM of $1.97 billion, the Direxion Daily S&P Biotech Bear 3X Shares has an expense ratio of 0.95% (read: 5 Best Inverse/Leveraged ETF Areas of Last Week).
MicroSectors Oil & Gas Exploration & Production 3X Leveraged ETNs (OILU - Free Report) — up 188.8%
The MicroSectors Oil & Gas Exploration & Production 3X Leveraged ETNs (3X ETNs) seek to track investment results that are three times the performance of the MicroSectors Oil & Gas Exploration & Production Index, compounded daily, minus the applicable fees. The MicroSectors Oil & Gas Exploration & Production 3X Leveraged ETNs has an expense ratio of 0.95% along with an AUM of $59 million.
Direxion Daily Energy Bull 2X Shares (ERX - Free Report) — up 108.5%
The Direxion Daily Energy Bull 2X Shares seeks daily investment results, before fees and expenses, of 200% of the performance of the Energy Select Sector Index. With an AUM of $673 million, the Direxion Daily Energy Bull 2X Shares has an expense ratio of 0.95%.
ProShares Ultra Oil & Gas (DIG - Free Report) — up 100.9%
ProShares Ultra Oil & Gas seeks daily investment results, before fees and expenses, that correspond to two times (2x) the daily performance of the Dow Jones U.S. Oil & Gas Index. DIG has an AUM of $201.7 million and charges an expense ratio of 0.95%.
Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH - Free Report) — up 88%
GUSH seeks daily investment results, before fees and expenses, of 200% of the performance of the S&P Oil & Gas Exploration & Production Select Industry Index. With an AUM of $936.6 million, the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares has an expense ratio of 1.01%.
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5 Leveraged Oil-Energy ETFs Up More than 80% YTD
The energy space has been undoubtedly the best-performing S&P 500 sector so far in 2022. The S&P 500 Energy Index has been up 50.3% year to date against the broader index’s 16.6% decline.
The strength in the energy space clearly attracted investor’s attention. Various factors have been driving this upside in the sector for a while. Reopening global economies from the pandemic-led restrictions and the accelerated coronavirus vaccine rollout that help tame the outbreak supported the sector. Growing demand from the rising economic activities is making the sector’s prospects bright. Adding to these factors is the macroeconomic element like the Russia-Ukraine war crisis that is resulting in the rally in crude oil.
This attack is bumping up oil prices as Russia is the world’s second-largest oil producer. European refineries procure most of their crude oil supplies from Russia. Notably, the country provides about two-fifths of its natural gas supply to Europe. In fact, Russia emerged as the largest natural gas and oil supplier to the European Union in 2021. Crude oil is turning out to be the beneficiary of this already tight demand and supply market. In fact, Brent crude oil futures prices hit $139 a barrel in March 2022, witnessing its highest level since 2008.
The trend is expected to remain as the European Union is in talks to agree on a ban on the Russian oil imports. U.S. gasoline demand is also soon going to shoot up as the Memorial Day weekend will mark the beginning of the U.S. summer driving season. According to SPI Asset Management managing partner Stephen Innes, "Oil prices are supported as gasoline markets remain tight amid solid demand heading into the peak U.S. driving season. Refineries are typically in ramp-up mode to feed U.S. drivers' unquenching thirst at the pump," as mentioned in a Reuters article.
Leveraged Oil-Energy ETFs Up More Than 80% YTD
Here we highlight some leveraged oil-energy ETFs that have been up more than 80% so far in 2022.
However, investors need to note that these products are extremely volatile and suitable only for short-term traders. These trades can cause huge losses compared to the traditional funds during turbulent market conditions. Market participants may enjoy higher returns in a short period of time, provided the trend remains in favor, largely due to the compounding effect of these products. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures.
MicroSectors U.S. Big Oil Index 3X Leveraged ETNs (NRGU - Free Report) — up 216.2% year to date
The return on the MicroSectors U.S. Big Oil Index 3X Leveraged ETNs (3X ETNs) is linked to three times leveraged participation in the performance of the Solactive MicroSectors U.S. Big Oil Index, compounded daily, minus the applicable fees. With an AUM of $1.97 billion, the Direxion Daily S&P Biotech Bear 3X Shares has an expense ratio of 0.95% (read: 5 Best Inverse/Leveraged ETF Areas of Last Week).
MicroSectors Oil & Gas Exploration & Production 3X Leveraged ETNs (OILU - Free Report) — up 188.8%
The MicroSectors Oil & Gas Exploration & Production 3X Leveraged ETNs (3X ETNs) seek to track investment results that are three times the performance of the MicroSectors Oil & Gas Exploration & Production Index, compounded daily, minus the applicable fees. The MicroSectors Oil & Gas Exploration & Production 3X Leveraged ETNs has an expense ratio of 0.95% along with an AUM of $59 million.
Direxion Daily Energy Bull 2X Shares (ERX - Free Report) — up 108.5%
The Direxion Daily Energy Bull 2X Shares seeks daily investment results, before fees and expenses, of 200% of the performance of the Energy Select Sector Index. With an AUM of $673 million, the Direxion Daily Energy Bull 2X Shares has an expense ratio of 0.95%.
ProShares Ultra Oil & Gas (DIG - Free Report) — up 100.9%
ProShares Ultra Oil & Gas seeks daily investment results, before fees and expenses, that correspond to two times (2x) the daily performance of the Dow Jones U.S. Oil & Gas Index. DIG has an AUM of $201.7 million and charges an expense ratio of 0.95%.
Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH - Free Report) — up 88%
GUSH seeks daily investment results, before fees and expenses, of 200% of the performance of the S&P Oil & Gas Exploration & Production Select Industry Index. With an AUM of $936.6 million, the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares has an expense ratio of 1.01%.