Out of the few assets that stayed strong this year, oil is one. The liquid commodity sprung higher in recent trading to a four-year high level.WTI crude is trading around $72/barrel while Brent is currently near the $82-mark.
The latest pickup in oil prices was backed by Saudi Arabia and Russia’s refusal to increase production, as suggested by the United States, amid looming sanctions against Iranian oil. Notably, President Trump wanted output increased by as much as two million barrels a day. Investors should note that the United States’ sanctions against Iran were put into place in August.
The sanctions are on cars, and metals and minerals as well as U.S. and European aircraft. The second part of the sanctions that prohibits import of Iranian energy will have effect starting Nov 5. Due to the Iran sanctions, about 1.4 million barrels-a-day of supply will be out of the market (read: Oil ETFs: What You Need to Know).
Venezuela, which has one of the world's largest proven oil reserves, has also been seeing a decline in crude production in recent years. Venezuela’s oil production has halved since the early 2000s. JP Morgan now expects Brent crude to touch $85 a barrel over the next six months — while a rise to $90 is possible as well.
If oil prices keep rising, it will definitely put some country stocks and ETFs in focus. These are the key oil producing and exporting countries with oil accounting for a major share of their GDP. These country ETFs bled when oil slipped but gains are likely if oil prices continue to go higher.
Below we highlight three such country ETFs.
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 a key part of the country’s GDP. 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, charging investors 50 basis points a year in fees.
The ETF is concentrated on energy stocks, as these make up for more than 30% of the portfolio. Thanks to a surge in oil prices, NORW may see solid trading ahead. Also, the country hiked rate for the first time in seven years on Sep 20. Also, financial stocks normally perform better in a rising rate environment. With financial stocks taking about 22% of the fund, NORW has all the more reason to gain (read: Norway Hikes Rate for First Time in 7 Years: ETFs in Focus).
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. The best way to invest in Canada is through iShares MSCI Canada ETF. 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.
VanEck Vectors Russia ETF (RSX - Free Report)
Oil is seemingly the main commodity of Russia. 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 biggest natural gas reserve. This makes it clear why Russia’s economy is highly dependent on oil price movement (see all Broad Emerging Market ETFs here).
RSX is the most popular fund in the Russia ETF space. The energy sector accounts for about 40% of RSX, which charges 62 basis points as net expenses.
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