Looks like the oil price rout will take a breather for a while. After an output cut deal signed on November 30, non-OPEC members too decided over the weekend to join to the output cut move in order to tighten supplies and put an end to a two-and-half year long oil price upheaval.
This has given a boost to both WTI and Brent futures by about 5% and poised oil-related investments for gains in the coming sessions (read: Top ETF Stories of November: Spotlight on Election & OPEC).
As per Bloomberg, the OPEC and non-OPEC pact will likely control over 60% of the world’s oil output. However, the move does not include major producers like the U.S., China, Canada, Norway and Brazil.
Already crude oil price was headed toward $55-level at the time of writing. In fact, as per Bernstein, “assuming reasonable compliance levels, these cuts will be enough to push the market into deficit” and lead to $60/bbl Brent crude price in the near term.
If this $50–$55 becomes a reality and stays for long, it will definitely put some country stocks and ETFs in focus. These are the key oil producing and exporting countries with revenues earned from oil accounting for a major share of their GDP. These country ETFs bled when oil slid but could be on high gear if oil prices stage a sustained recovery.
As we all know, ETFs offer a great opportunity while it comes to playing a particular nation. In light of this, we have highlighted five country ETFs that could shoot up in the days ahead should oil price cross the $50 mark on its way above.
Market Vectors Russia ETF ((RSX - Free Report) )
The Russian economy contracted 0.4% year over year in Q3, marking the minimum shrinkage in seven quarters. Stubbornly low oil prices were mainly behind this prolonged downturn in the economy. Oil – seemingly the main commodity of the nation – posed huge risks to the nation.
About half of Russia’s exports in terms of value come from oil and natural gas as the country has the third-largest oil reserve in the world and the biggestnatural gas reserve. This makes it clear why Russia’s economy is highly dependent on the oil price movement.
RSX is the most popular and liquid option in the space with an asset base of $2.30 billion and average trading volume of more than 9 million shares a day. The energy sector accounts for about 40% of RSX, which charges 67 basis points as expenses (read: Will Russia ETFs Prosper Under Trump Presidency?).
The Global X MSCI Norway ETF (NORW - Free Report)
Norway is among the top 10 nations famous for oil exports and with its comparatively low population, oil forms the key part of the country’s GDP. As per the U.S. Energy Information Administration (EIA), Norway is the biggest oil driller in Europe.
The most popular way to play the country is with NORW. The product tracks the MSCI Norway IMI 25/50 Index, a charging investors 50 basis points a year in fees (read Nordic ETF Investing 101).
The ETF is concentrated on energy stocks, as these make up for nearly 28% of the portfolio. In fact, Norwegian oil giant Statoil accounts for 17% of the portfolio alone, suggesting heavy concentration. Thanks to a surge in oil prices, NORW may see solid trading ahead.
iShares MSCI Canada ETF (EWC - Free Report)
Canada is also among the world’s top 10 oil producers. The oil, gas and mining sector makes up for about over a quarter of the Canada’s economy. Its currency gained about 1.8% as of December 11, since the OPEC output cut deal was signed on November 30.
The best way to invest in Canada is through iShares MSCI Canada ETF, a product that has nearly $3.59 billion in assets. The fund holds just under 100 stocks in its basket. Energy makes up a huge chunk of assets accounting for over one-fifth of the total.
Global X MSCI Colombia ETF (GXG - Free Report)
Oil exports in Colombia account for about 20% of government revenue. Oil sales were estimated to come around $1.1 billion in 2016 due to persistently low oil prices against $6.7 billion in 2014. As a result, a spike in oil prices will definitely ease some revenue pressure (read: After FARC Vote, Where Is the Colombia ETF Headed For?)
Though the Colombia ETF GXG is heavy on Financials (45.38%), the energy sector has about 9.5% exposure. The fund charges about 61 bps in fees overall.
Global X MSCI Nigeria ETF ((NGE - Free Report) )
Nigeria – an OPEC member – is one of the biggest net crude exporters in the world. An option to invest in Nigeria is a Global X ETF, NGE. This fund give exposure to about 20 companies and charges investors 93 basis points a year in fees.
Though consumer staples and financials mainly regulate the fund, making up about 82% of the holdings, energy has about 6% exposure. That is why, it is important to see how the fund fared during the recent oil price uptrend.
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