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Oil prices have been among the most-typed investment words this year. United States Oil Fund, LP (USO - Free Report) has advanced 20% this year and lost 8.7% in the past three months as demand doubt looms.
The coronavirus vaccine rollout is gradually helping to control the spread of the outbreak across the globe. Factors like easing Omicron concerns, supply shortages, and geopolitical tensions in Eastern Europe and the Middle East have thus boosted oil prices this year.
But heightened recessionary fears have weighed on the prospects of oil consumption, which is why oil prices lost in recent months. Global oil prices slid below $80 per barrel for the first time since January on Dec 6, due to growing concerns about global demand. Only some bullish effects from an EU-led price cap on Russian oil sales may give some support to the oil price.
What Lies Ahead?
Energy stocks have room to go higher, even after a succesful run this year, says one strategist, as quoted on Yahoo Finance. "They're still cheap if you look at it on most metrics,” Tortoise portfolio manager Rob Thummel told Yahoo Finance.
“The market is really rewarding companies that have positive earnings and free cash flow. That’s what this sector has,” said Thummel," I still think there’s room for it to continue, even if oil prices stay the same, or even if they fall a little bit." Thummel says the biggest driver for energy stocks going forward is the yield they offer investors.
In China, more cities are easing COVID-19-related restrictions, prompting expectations of increased demand in the world's top oil importer, though things are yet uncertain. If the re-openings in China get delayed, recovery in oil prices may also get delayed.
Russian oil exports could decline by two million barrels per day by end-2023, The Fitch Group said, as quoted on CNBC. The group mentioned that although that’s “not a significant amount,” it could bring about tightening into the market. This, in turn, may boost oil prices higher.
Against this backdrop, investors must be interested in keeping track of oil and energy ETFs. We highlight some ETFs for them below.
This ETF is active and does not track a benchmark. The InfraCap MLP ETF seeks total return primarily through investments in equity securities of publicly-traded master limited partnerships and limited liability companies taxed as partnerships. The fund’s expense ratio is 1.40%.
Pacer American Energy Independence ETF (USAI - Free Report) – Yields 5.16% annually
The underlying American Energy Independence Index measures the performance of a portfolio of U.S. and Canadian exchange-listed equity securities of companies that generate a majority of their cash flow from processing, storage, transportation, and distribution of crude oil, natural gas, refined products, and their related products, as well as the transmission or storage of renewable energy. The fund’s expense ratio is 0.75%.
Energy Select Sector SPDR Fund (XLE - Free Report) – Yields 3.49% annually
The underlying Energy Select Sector Index includes companies from the following industries: oil, gas & consumable fuels and energy equipment & services. The fund charges 10 bps in fees.
iShares Global Energy ETF (IXC - Free Report) – Yields 3.58% annually
The underlying S&P Global 1200 Energy Sector Index measures the performance of companies that are part of the energy sector of the economy & that are important to global markets. Component companies include oil equipment and services, oil exploration and production, oil refinery, oil storage and transportation & coal and uranium mining companies. The fund charges 40 bps in fees.
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Pain or Gain Ahead for Energy ETFs?
Oil prices have been among the most-typed investment words this year. United States Oil Fund, LP (USO - Free Report) has advanced 20% this year and lost 8.7% in the past three months as demand doubt looms.
The coronavirus vaccine rollout is gradually helping to control the spread of the outbreak across the globe. Factors like easing Omicron concerns, supply shortages, and geopolitical tensions in Eastern Europe and the Middle East have thus boosted oil prices this year.
But heightened recessionary fears have weighed on the prospects of oil consumption, which is why oil prices lost in recent months. Global oil prices slid below $80 per barrel for the first time since January on Dec 6, due to growing concerns about global demand. Only some bullish effects from an EU-led price cap on Russian oil sales may give some support to the oil price.
What Lies Ahead?
Energy stocks have room to go higher, even after a succesful run this year, says one strategist, as quoted on Yahoo Finance. "They're still cheap if you look at it on most metrics,” Tortoise portfolio manager Rob Thummel told Yahoo Finance.
“The market is really rewarding companies that have positive earnings and free cash flow. That’s what this sector has,” said Thummel," I still think there’s room for it to continue, even if oil prices stay the same, or even if they fall a little bit." Thummel says the biggest driver for energy stocks going forward is the yield they offer investors.
In China, more cities are easing COVID-19-related restrictions, prompting expectations of increased demand in the world's top oil importer, though things are yet uncertain. If the re-openings in China get delayed, recovery in oil prices may also get delayed.
Russian oil exports could decline by two million barrels per day by end-2023, The Fitch Group said, as quoted on CNBC. The group mentioned that although that’s “not a significant amount,” it could bring about tightening into the market. This, in turn, may boost oil prices higher.
Against this backdrop, investors must be interested in keeping track of oil and energy ETFs. We highlight some ETFs for them below.
ETFs in Focus
InfraCap MLP ETF (AMZA - Free Report) – Yields 7.40% annually
This ETF is active and does not track a benchmark. The InfraCap MLP ETF seeks total return primarily through investments in equity securities of publicly-traded master limited partnerships and limited liability companies taxed as partnerships. The fund’s expense ratio is 1.40%.
Pacer American Energy Independence ETF (USAI - Free Report) – Yields 5.16% annually
The underlying American Energy Independence Index measures the performance of a portfolio of U.S. and Canadian exchange-listed equity securities of companies that generate a majority of their cash flow from processing, storage, transportation, and distribution of crude oil, natural gas, refined products, and their related products, as well as the transmission or storage of renewable energy. The fund’s expense ratio is 0.75%.
Energy Select Sector SPDR Fund (XLE - Free Report) – Yields 3.49% annually
The underlying Energy Select Sector Index includes companies from the following industries: oil, gas & consumable fuels and energy equipment & services. The fund charges 10 bps in fees.
iShares Global Energy ETF (IXC - Free Report) – Yields 3.58% annually
The underlying S&P Global 1200 Energy Sector Index measures the performance of companies that are part of the energy sector of the economy & that are important to global markets. Component companies include oil equipment and services, oil exploration and production, oil refinery, oil storage and transportation & coal and uranium mining companies. The fund charges 40 bps in fees.