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5 ETFs Outperforming as Commodity Gauge Hits New High

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Commodities have been on a hot streak this year, buoyed by the shortage of energy and food supplies amid higher demand. This is especially true as the Bloomberg Commodity Spot Index, which tracks prices for 23 raw materials, hit the highest-ever level. Most of the rally was driven by a jump in natural gas and wheat prices amid renewed supply fears. The gauge is up 36% this year, heading for the biggest annual advance in more than a decade.

While most commodity ETFs have been soaring, United States Natural Gas Fund (UNG - Free Report) , United States Gasoline ETF (UGA - Free Report) , United States Brent Oil Fund (BNO - Free Report) , Teucrium Wheat Fund (WEAT - Free Report) and iPath Series B Bloomberg Nickel Subindex Total Return ETN (JJN - Free Report) have been the show stealers this year.

A wide range of raw materials is soaring thanks to massive stimulus spending, production cuts and widespread bottlenecks across supply chains. Skyrocketing inflation that compelled central banks to raise interest rates along with the Russia’s invasion of Ukraine has further disrupted energy and grain supplies in an already-tight commodity market (read: Tap Rising Grocery Prices With These ETFs).

On the other hand, the roll back of COVID-19 lockdowns in China has raised the demand for raw materials. Additionally, the combination of other factors such as increased demand for electric vehicles and green energy are creating a sustained surge in demand for relevant raw materials.

Notably, the Bloomberg spot energy subindex has skyrocketed more than 92% year to date, reaching the highest level since at least 1992, while a gauge tracking agricultural prices has gained 24%.

Further, the commodity futures market is in a state of backwardation, where later-dated contracts are cheaper than near-term contracts, which has erased worries about roll costs and supported the rally. This signals that the commodity market is tightening and demand is robust, paving the way for a rally. This trend is likely to persist, at least in the near term, acting as the biggest catalyst for the commodities.

We have profiled the ETFs below:

United States Natural Gas Fund (UNG - Free Report) – Up 154%

United States Natural Gas Fund provides direct exposure to the price of natural gas on a daily basis through futures contracts. If the near-month contract is within two weeks of expiration, the benchmark will be the next month's contract to expire (read: 10 Top-Performing Oil-Energy ETFs of May).

United States Natural Gas Fund has AUM of $531.9 million and trades in volume of around 8.7 million shares per day. The fund has 1.11% in expense ratio.

United States Gasoline ETF (UGA - Free Report) – Up 91.2%

United States Gasoline ETF is designed to track in percentage terms the movements of gasoline prices. The benchmark futures contract is the futures contract on gasoline as traded on the NYMEX. If the near-month contract is within two weeks of expiration, the benchmark will be the next-month contract to expire.

United States Gasoline ETF is illiquid with a daily trading volume of about 75,000, suggesting that investors have to pay extra beyond the annual fee of 0.90% per year. The fund has managed assets of $179.4 million.

United States Brent Oil Fund (BNO - Free Report) – Up 66.8%

United States Brent Oil Fund provides direct exposure to the spot price of Brent crude oil on a daily basis through futures contracts. BNO invests primarily in listed crude oil futures contracts and other oil-related futures contracts, and may invest in forwards and swap contracts.

United States Brent Oil Fund amassed $314.5 million in its asset base and charges 1.02% as annual fees and expenses. Volume is good as it exchanges 1.4 million shares a day on average (read: 5 ETFs to Tap Oil Price Strength).

Teucrium Wheat Fund (WEAT - Free Report) – Up 51.7%

Teucrium Wheat Fund provides investors an easy way to gain exposure to the price of wheat futures in a brokerage account. It uses three futures contracts for wheat, all of which are traded on the CBOT Futures Exchange. The three contracts include the second-to-expire contract weighted 35%; the third-to-expire contract weighted 30%; and the contract expiring in December following the expiration month of the third-to-expire contract weighted 35%.

Teucrium Wheat Fund has amassed $596.2 million in its asset base and trades in a good volume of about 4.5 million shares a day. It charges a fee of 1.14% per year and has a Zacks ETF Rank #3 with a High risk outlook.

iPath Series B Bloomberg Nickel Subindex Total Return ETN (JJN - Free Report) – Up 43.6%

iPath Series B Bloomberg Nickel Subindex Total Return ETN follows the Bloomberg Nickel Subindex Total Return, which delivers returns through an unleveraged investment in the futures contracts on nickel.

The note has been able to manage $48.1 million in AUM and trades in a paltry volume of roughly 25,000 shares per day. It has an expense ratio is 0.45% and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.