From breaking news about what is happening in the stock market today, to retirement planning for tomorrow, we look forward to joining you on your journey to financial independence. Historically, significant players in the Canadian oil sector include Suncor Energy, Canadian Natural Resources Limited, and Cenovus Energy. These corporations have established operations, significant oil reserves, and have demonstrated resilience across different market circumstances. It is important to assess your personal goals and investment time horizon before choosing one or more oil ETFs to invest in. ENCC pays an extremely high yield on a monthly basis to investors. Similar to most other energy ETFs and funds, XEG is rated as a high-risk fund.
Picks are based on historical performance, expense ratios and more. You’ve got geopolitics, climate pressures, dodgy balance sheets, and management missteps Best oil etf to contend with. WTI is a US-based benchmark, while Brent is an international benchmark.
That makes sense at first glance, given the basic mechanics of how an integrated oil and gas company earns revenue. Oil industry ETFs provide investors with an opportunity to tap into the largest commodity market in the world. Some of the fund’s largest holdings are in the ProPetro Holding Corporation, the Keane Group Inc. and RPC Inc.
The United States Oil Fund (USO) is designed for investors who want direct exposure to West Texas Intermediate (WTI) crude oil prices. With an expense ratio of 0.7%, it’s pricier than equity-based ETFs but provides a pure play on oil price movements through futures contracts. USO’s year-to-date return highlights the volatility of commodity-based ETFs, particularly in a market affected by supply gluts or demand shifts. A Crude Oil ETF offers investment exposure to crude oil, a globally traded commodity used primarily as fuel and in industrial processes. These funds typically track oil prices through futures contracts or related derivatives rather than holding physical barrels.
- The Invesco S&P 500 Equal Weight Energy ETF is intentionally listed right after XLE.
- These corporations have established operations, significant oil reserves, and have demonstrated resilience across different market circumstances.
- Samer has a Bachelor Degree in economics with the specialization of banking and insurance.
- Some of the biggest players in the energy sector today can trace their corporate roots directly to the 34 operating companies created by Standard Oil’s historic breakup.
- ENCC has a long performance track record and is a fairly small ETF.
- 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.
The Energy Select Sector SPDR Fund
This is a rare time in the stock market where smaller stocks have been laggards. XOP has plenty of big companies, but anything outside the very largest looks more fairly valued right now. Of the three ETFs I chose to highlight in this article, the most unique is XOP. That’s because it focuses not on the energy sector across the board, and with the very largest stocks.
United States Oil Fund (USO)
Many investors use platforms like Pocket Option to execute their oil ETF strategies efficiently. Like any investment vehicle, crude oil ETF’s come with their own set of benefits and drawbacks that investors should carefully weigh before allocating capital. Energy ETFs are often viewed through a one-dimensional lens – primarily as a way to speculate on commodity prices.
- The ETF targets the broad energy sector in Canada and includes the stocks of companies involved in various stages of the energy process, including extraction and transportation.
- Another good option for a Canadian energy fund is BMO’s ZEO ETF.
- While the benchmark differs from that of VDE or XLE, the overall exposure and historical performance are very similar.
- That’s because it focuses not on the energy sector across the board, and with the very largest stocks.
- Despite the rise of renewable energy research, the demand for oil continues to grow.
Global Energy Market Outlook (2025–
Even small differences in expense ratios can significantly impact long-term performance, especially during periods when oil markets move sideways. Oil market investments will likely remain volatile, influenced by global supply-demand dynamics, geopolitical events, and macroeconomic factors. By understanding the structural advantages and limitations of crude oil ETFs, investors can make more informed decisions about incorporating these instruments into their portfolios. The Vanguard Energy ETF is a passively managed fund that tracks the MSCI US IMI Energy 25/50 index. The fund seeks to replicate the performance of the entire energy sector of the United States and doesn’t focus solely on oil investments.
Why Invest in Energy Stocks in 2025?
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.
However, it’s crucial to assess your financial goals, risk tolerance, and time horizon before investing. So, adding some oil and gas companies to your portfolio today makes sense. Although these companies will likely underperform over the long run, we must look to commodity plays not for their past performance but for future potential. The oil market’s complexity—driven by supply chains, geopolitics, and economic shifts—can make investing feel like a guessing game.
Oil ETFs help investors gain increased exposure to the oil market
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.
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. As a fund investing directly in commodity futures, it should likely only be used for tactical purposes over the short term. As an example, the performance of the ETF over a 12-year period from early 2010 to early 2022 has been negative. The ETF has a fairly long performance track record and is a small ETF in terms of assets.
It currently holds just over 100 energy stocks in a market cap-weighted portfolio. Sarah Horvath is a seasoned financial writer with a specialization in investing content. With a keen eye for market trends and a deep understanding of investment strategies, Sarah delivers insightful and informative articles tailored to investors. Her dedication to providing valuable content empowers readers to make informed decisions in the dynamic world of finance. Sarah’s expertise extends across various investment vehicles, including stocks, bonds, cryptocurrencies, and real estate. Whether analyzing market movements, evaluating investment opportunities, or demystifying complex financial concepts, Sarah’s writing is characterized by clarity, accuracy, and actionable insights.
Why XLE Is A Top Choice
Analysts are optimistic, projecting price targets, which suggests meaningful upside potential. XLE’s high liquidity, with tight bid-ask spreads, makes it ideal for both long-term investors and those looking to trade actively. If you’re seeking a stable, low-cost way to invest in the energy sector, XLE is a top contender. There are also Exchange Traded Commodities (ETCs) in some markets, which focus on single commodities like oil but function similarly to ETFs. If your goal is to hedge against high inflation while still earning attractive income, then a Canadian oil ETF might be a good investment.
A Canadian oil ETF will therefore hold a basket of different Canadian oil stocks, either spread out between each of the three segments or concentrated in a particular one. The ETF aims to passively provide investors with the return of the Solactive Light Sweet Crude Oil Winter MD Rolling Futures Index ER. ENCC has a long performance track record and is a fairly small ETF.
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