Oil services ETFs hold stocks from these companies, so they tend to perform well when the oil sector is riding high. Investors can strengthen their portfolios by combining different types of energy stocks and strategies. Renewable energy stocks are set to benefit from accelerated investment in solar, wind, and hydro projects across Europe, North America, and Asia. High-return projects, strong dividends, and low-carbon investments.
- There are some “integrated” or oil “majors” in the stock market, and those are the most recognizable names.
- It is slightly more expensive than XLE but remains competitive within its niche.
- It serves utilities, municipalities, industries, and cooperatives, with billions invested annually in renewable expansion.
- Compared to broad energy sector ETFs, HOG has historically lower volatility given that its holdings have fixed service costs.
- The ETF has a fairly long performance track record and is a small ETF in terms of assets.
No matter which way you think oil prices are headed, there is an oil ETF that will make you money if you’re right. Global renewable stock picks like NextEra Energy, Iberdrola, and Brookfield Renewable are expanding energy storage technologies and grid capacity to support utility sector performance. This balanced approach helps them navigate fossil fuels vs renewables dynamics while positioning for the future of the energy sector. 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.
What is the main difference between futures-based and equity-based crude oil ETFs?
About 47% of the fund’s total investments are in those two companies. This is a market-cap weighted fund, so its holdings are highly concentrated in larger companies. The 25 companies it holds are the largest, most notable companies in the oil equipment and services sector, so they represent some of the top picks in the category. Brent has its own unique market, so there’s an entirely different set of supply & demand considerations that can affect prices. The Invesco DB Oil Fund also trades WTI futures, but it’s designed to track a different benchmark index.
Below, we’ll examine a selection of popular and well-regarded Oil ETFs, highlighting their key characteristics to help you make informed investment decisions. We will consider factors such as expense ratios, top holdings, and reasons to consider each ETF. Some companies were coming out of the pandemic that returned in excess of 1000%, while others completely fizzled out.
- Different Strategies for Investors – These ETFs offer exposure to crude oil futures, energy producers, and midstream infrastructure, catering to different risk appetites.
- He also prepares detailed written educational lessons related to various asset classes and trading strategies.
- The ETF targets an equally weighted allocation, with each stock receiving a 9–11% weighting.
- Delivering WTI to high-demand markets in Europe and Asia can be so expensive that it can’t compete with Brent in terms of pricing.
United States Brent Oil Fund (BNO)
OIH gives you leveraged exposure to drilling and engineering companies riding the oil wave. UCO aims to double the daily price movement of crude oil, which means you can win big – or lose even faster. And, unless you’ve been living under a rock the last year or so, you know that policy makers, at least south of the border, are having a very hard time hitting their 2% inflation target. There are plenty more out there to choose from, but this introduction hopefully gets the research and thought process started for investors.
These funds track the price of West Texas Intermediate, which is the benchmark price for US crude oil. Some funds hold a basket of oil companies, while others invest in commodity futures. The energy sector outlook 2025–2030 includes significant LNG and infrastructure growth. Energy infrastructure companies such as Oneok, Energy Transfer, Williams, and Enbridge are developing new LNG terminals, pipelines, and storage facilities to meet rising export demand. Enbridge is one of North America’s largest energy infrastructure companies, with oil, gas, and renewable operations.
Invesco’s S&P SmallCap Energy tracks the S&P SmallCap Energy index. NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past Best oil etf market performance, and past performance is not a guarantee of future performance.
What are the tax implications of investing in oil ETFs?
If there were such a thing as a “base case” investment in the energy sector, at least within the U.S. stock market, it is the Energy Select Sector SPDR ETF. This is one of the 11 “sector Spider” ETFs, most of which were created late last century, to track the 11 sectors within the S&P 500 index. It holds all the energy stocks in that broader index, and weights them according to company size, also referred to as market capitalization. As you can see below, at a market cap of more than $38 billion on average, XLE focuses on the energy giants. IEO’s focus on upstream activities makes it appealing for investors bullish on oil production.
ProShares Ultra Bloomberg Crude Oil (UCO)
Oil ETFs offer investors a way to participate in the crude oil market without directly trading futures contracts or physically storing oil. The energy sector is constantly influenced by factors like global demand, production levels, and geopolitical events. Energy stocks are in focus in 2025, spanning oil and gas producers, renewable energy stocks, utilities, and energy infrastructure companies. Global energy companies are balancing the clean energy transition with strong demand for fossil fuels, offering investors a mix of growth, dividends, and diversification.
The fund comes with a relatively higher MER than some of its peers. If you prefer having a good yield from your Canadian energy ETF, XEG is a great option to consider with good all-around features. XEG is a passively managed ETF that aims to replicate the S&P/TSX Capped Energy Index. The index is market-cap-weighted, so larger companies will have higher weights in both the index and the ETF. Investors interested in gaining access to the oil sector should do so via an Oil ETF. Thus, investors could see divergence if they hold this ETF longer than a day.
Best Oil ETFs to Buy in 2025
Selecting the right crude oil ETF requires careful analysis of several important factors. These considerations will help determine which fund aligns best with your investment goals and risk tolerance. Finally, we have leveraged oil ETFs, which track the price of crude oil or a specific oil sector, and has a certain performance multiplier. Note that some of these oil exploration and production ETFs may have some exposure to companies that derive a portion of their revenue from natural gas. Oil exploration and production ETFs do not track the price of the commodity, rather, they are sector specific ETFs that hold stock of drilling and exploration companies.
An example of an upstream oil ETF is the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). To narrow the field, we focused only on broad energy sector ETFs, funds that provide diversified exposure across the entire oil and gas value chain. Currently, the Oil & Gas ETF list contains 49 funds with a combined AUM of $57.43B and an average 1-year return of -4.51%. Get a piece of the pie is by investing in an oil exchange traded fund (ETF).
ExxonMobil is a global oil & gas integrated company with operations in exploration, production, refining, chemicals, and low-carbon solutions. One little-known company—almost entirely overlooked by most AI investors—could be the ultimate backdoor play. But it might be the most important AI stock in the US owns critical energy infrastructure assets positioned to feed the coming AI energy spike. 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. We also excluded leveraged and inverse energy ETFs, which are generally geared toward short-term trading, not long-term investing. These products reset daily, and compounding effects over time can result in returns that deviate significantly from the underlying benchmark.
This ETF gives you that high-risk, high-reward exposure – but with a safety net through diversification.
It’s a good option for investors seeking diversified exposure to Canada’s energy sector. Energy sector stocks can be highly sensitive to commodity price swings. Changes in oil price forecast 2025, gas demand, or electricity market dynamics can impact revenues for both oil & gas producers and renewable energy stocks. While past performance doesn’t guarantee future results, examining historical data can provide insights into how different funds have navigated various market conditions. Here’s an overview of some notable crude oil etfs based on their historical performance metrics. The best crude oil ETFs are Energy Select SPDR Fund, Vanguard Energy ETF, Alerian MLP ETF, SPDR S&P Oil & Gas Exploration & Production ETF, and United States Oil Fund LP.
