You are speculating on the price of the market rather than taking ownership of the stocks. If you open a long position and the stock or ETF does increase in value, you’ll make a profit, but if it falls in price, you’ll make a loss – the opposite is true for a short position. These leveraged ETFs seek a return that is 200% or -200% of the return of their benchmark index for a single day. The funds should not be expected to provide two times or negative two times the return of the benchmark’s cumulative return for periods greater than a day. The iShares Oil & Gas Exploration & Production UCITS ETF invests in stocks with a focus on Energy, World.
This is also an industry with a history of paying high dividends and other shareholder-friendly practices, especially for some sub-segments like midstream (pipelines). EOG has consistently raised its dividend, with a 22% CAGR since 1999, and has never interrupted or reduced the dividends, even when most of the shale oil industry was doing so or going bankrupt. With a current net debt of -$1.2B, this makes the company feel rather safe and shareholder-friendly compared to its peers. EOG, one of the best oil stocks, is a major shale producer, producing 908 Koebd in shale basins and most oil regions of the USA, minimizing geopolitical risk.
- Adding too much of a Canadian oil ETF can leave an investor excessively exposed to the industry’s risks.
- As noted at the beginning of this article, indexes like the S&P/TSX Capped Composite are heavily concentrated in energy stocks, which includes oil stocks.
- That’s led to record levels of free cash flow – essentially the money left over after paying for operations and maintenance.
- It’s a small fund in comparison to the USO, with only $83.4 million in net assets.
Getting Started with Oil ETFs – Quick Guide
Oil ETNs, or exchange-traded notes, are similar to oil ETFs in that they are both traded on securities exchanges and can be bought and sold throughout the trading day, like stocks. You can use oil ETFs to speculate on the price movements of a single market such as Brent or WTI, get exposure to a basket of commodities, or invest in a group of petroleum companies. Some even enable you to go short on an underlying index or offer leveraged returns. With gas prices so high, people are looking to add oil securities to their portfolios. Oil ETFs offer a way to invest in oil without buying and selling futures. To give investors an idea where to start and which companies to look for investment, we have compiled a list of top 10 ETFs to buy in 2024.
- Upstream companies are responsible for finding and extracting these hydrocarbons from the ground.
- The answer to this question depends on your time horizon, investment objectives, and risk tolerance.
- The funds should not be expected to provide two times or negative two times the return of the benchmark’s cumulative return for periods greater than a day.
- As energy as a sector is still out of favor, oil companies are often undervalued or distributing generous dividends.
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On the other hand, Brazil is a country with serious reputational problems among investors, and the recent election of socialist Lula to the presidency has spooked markets. Riots storming several government buildings by his opponent’s supporters did not help either. Petrobras is the national oil company of Brazil, a country on its way to becoming the world’s 4th largest producer of oil. In Q1 2023, Exxon produced 3,831 Koebd (thousands of oil equivalent barrels per day).
Top Oil ETFs by AUM
In this situation, investors can have a similar exposure to the energy sector as other sectors or have an underweight/overweight to the sector. In any case, a 100% allocation to the energy sector is likely not prudent and leaves your portfolio extremely under-diversified. While both oil and energy ETFs add exposure to changes in the commodity’s prices, it’s important to understand the key difference between the two.
Investing in oil carries real risks, as illustrated by the near-total bankruptcy of the offshore drilling sector after persistent low oil prices for years in the mid-2010s. So it is best to Best oil etf take a cautious approach and to keep diversification relatively high if . This ETF is focused on the so-called mid-stream sector or the gas and oil pipelines that transport energy throughout the USA. This is a sector that tends to be less volatile than energy producers and also distributes generous dividends, relying on its quasi-monopoly and the high value of its transportation assets.
Top Canadian Oil ETFs of 2025
However, oil prices are inherently volatile, so consider your risk tolerance. Lower expense ratios mean more of your investment return is retained. Compare expense ratios across different oil ETFs, but also consider the ETF’s tracking performance and trading volume..
Similar to hedge funds, NNRG charges a performance fee of 10% on any return above the S&P/TSX Capped Energy Total Return Index. When considering the management fee, performance fee, and trading fees, the total fees that you will pay as an investor will be extremely high relative to passive ETFs. If you are looking to invest in the Canadian oil and gas sector and are also looking for a high monthly income stream, ENCC is an excellent option to consider. Middle East tensions, the Ukraine war and ongoing supply cuts from the Organization of the Petroleum Exporting Countries (OPEC) are supporting higher prices for crude oil in 2024. There are six distinct oil commodity ETFs that trade in the United States, excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM). The largest risk would be a major recession or any other event sending oil into a sustained lower price range, which would crush the demand for offshore drilling.
An oil EFT is a bundle of stocks that are related to the oil industry. The fund has over $410 million in holdings and sees an average daily trading volume of over 300,000 shares. Some of the fund’s top holdings include major domestic oil producers like ConocoPhillips, Marathon Petroleum Corporation and Phillips 66 — all of which have seen positive 1-year returns of over 7%. Check out our list of some of the most profitable oil ETFs on the market to see if the oil sector is right for you. These tend to carry complex tax treatment – often issuing Schedule K-1 forms at tax time – and come with higher expense ratios and elevated volatility.
In most situations, opting for the energy sector ETF is likely a better option instead of adding exposure directly to oil or oil futures. The ETF has a fairly long performance track record and is a small ETF in terms of assets. The fund’s low asset level does put it at risk of closing in the future if it’s unable to attract more assets. Rapidly rising oil prices between early 2020 and mid-2022 have led to strong performance for XEG during this time. Since the oil and gas sector has specific characteristics, investing in an oil or energy ETF makes sense for certain investors.
Why there are no oil ETFs in most European countries
Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. Among other large oil ETFs, the Invesco DB Oil Fund (DBO) has returned 28%, while the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) has added 22%. Chevron and ConocoPhillips certainly stand out for their ability to pay dividends. With NAGA, you can trade a wide range of CFDs on stocks and invest in +3.000 stocks and ETFs with ownership. If you’re less willing to handle volatility or simply prefer to avoid fossil fuels because of their negative impact on the environment, you’ll likely be better off with other investments.
Top oil ETFs in Canada
The fund attempts to weight small-, mid- and large-cap stocks equally for a more diverse portfolio offering. The fund has over $926 million in holdings contained within just 25 funds, but fees are low at just 0.35%. Shares of the VanEck Vectors Oil Services ETF are suitable complements for both short- and long-term investors but should be balanced out with shares of a total market index fund to limit risk. Vanguard is known as 1 of the world’s most prolific providers of low-cost total market index funds, but the company also offers a number of industry-specific ETFs. Picks are based on historical performance, expense ratios and more. The higher expense ratio for RSPG may be a worthwhile trade-off for investors looking to sidestep concentration risk and gain more balanced exposure to the sector.
NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. It’s easy to see why Chevron and ConocoPhillips are the top two holdings of the dividend-focused Schwab U.S. Dividend Equity ETF. They pay high-yielding dividends that they’ve increased at above-average rates in recent years. With more dividend growth ahead, they’re great stocks to buy for a growing stream of dividend income. Chevron is best for those seeking a higher-yielding payout, while ConocoPhillips is better for those seeking higher-octane dividend growth.
IShares’ XEG comes with a very long performance track record and is a massive ETF in terms of assets under management. The ETF, like other total return ETFs offered by Horizons, uses a total return swap strategy to make it more tax efficient for investors. The swap offers investors the same return as the index without holding the underlying stocks. That said, if a recession begins to look more likely in 2025, oil prices could come back down in anticipation of lower demand.