(1:00) - Breaking Down The Recent Market Moves In Oil Prices (7:50) - Why Is Expansion So Difficult In The Oil Industry? (12:45) - Alternative Energy: Will Fossil Fuel Production Continue To Rise? (18:00) - What Should We Expect From Energy Earnings This Quarter? (21:15) - Top Stocks and ETFs To Keep On Your Radar Podcast@Zacks.com
In this episode of ETF Spotlight, I speak with Sheraz Mian, Zacks Director of Research and a former oil analyst, about energy stocks.
Energy was the best performing sector in 2021, and it is the only sector in the green this year with a gain of over 30%. These stocks have taken a beating in the past few weeks, with rising fears of a global recession.
Crude prices, which had surged to above $120 a barrel earlier this month, fell last week to around $104, before rebounding a bit this week.
President Biden is planning to travel to Middle East next month to ask for an increase in oil production but there are questions whether Saudi Arabia and the United Arab Emirates have enough spare capacity to raise production.
Biden also wants US oil companies to increase production and expand refining capacity and blames them too for high fuel costs in the country. But increasing output is not easy due to massive underinvestment in fossil fuels over the past few years amid push for transition to green energy.
Will we see a resurgence of investment in traditional energy sources if oil prices remain elevated and how will increased production of fossil fuels impact the goal to achieve net-zero emissions by 2050?
Sheraz believes that easy gains in energy stocks have been made as oil prices may remain around current levels in the coming months. He expects these stocks, particularly E&P companies, to remain volatile for some time. However high-quality energy stocks are still worth a look for long-term investing.
CVX Quick Quote CVX - Free Report) , Exxon ( XOM Quick Quote XOM - Free Report) , Pioneer Natural Resources ( PXD Quick Quote PXD - Free Report) , Haliburton ( HAL Quick Quote HAL - Free Report) and Schlumberger ( SLB Quick Quote SLB - Free Report) are among the stocks he likes. Tune in to the podcast to learn more.
Popular oil ETFs like the United States Oil Fund (
USO Quick Quote USO - Free Report) use different futures strategies to track oil prices. They are good at tracking the commodity in the shorter-term but could perform much worse than the commodity in the longer-term due to contango issues.
For long-term investors, it is better to consider ETFs that hold energy companies, rather than futures. The Energy Select Sector SPDR Fund (
XLE Quick Quote XLE - Free Report) and the Vanguard Energy ETF ( VDE Quick Quote VDE - Free Report) are market-cap-weighted ETFs. and Chevron account for about 40% of their portfolio.
The SPDR S&P Oil & Gas Exploration & Production ETF (
XOP Quick Quote XOP - Free Report) is an equal-weighted ETF. It tilts away from the oil giants and toward small- and mid-cap companies.
Make sure to be on the lookout for the next edition of ETF Spotlight! If you have any comments or questions, please email email@example.com.