Unlike many in my industry, I prefer “concentrated” ETFs, those that have fewer holdings and focus a large portion of assets on a small number of stocks. My reasoning is that with an ETF like XLE, I am not going to allocate a huge portion of my total portfolio to it. However, risks like price volatility, geopolitical disruptions, and contango (where futures prices exceed spot prices) can affect returns. By understanding these dynamics, you can make informed decisions to leverage oil ETFs effectively. The oil producer’s target is to deliver dividend growth in the top 25% of companies in the S&P 500 in the future. Fueling that plan are the impact of accretive acquisitions (it bought Marathon Oil last year), its high-return investment strategy, and its meaningful share repurchase program.
Small-caps can shoot up quickly when oil prices are on the rise – but they can also tumble just as fast. This is the granddaddy of oil ETFs – a firm favourite among investors. It’s cheap to hold, packed with oil royalty, and tends to perform well when oil prices climb. This can erode returns in ETFs that roll over near-month futures contracts, as they are forced to repeatedly buy higher-priced contracts.
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. Energy Information Administration, the United States used around 18 million barrels of oil every day in 2020. The international daily demand for crude oil is at an all-time high, and data from Statista suggests the world consumes over 99 million barrels of oil every day. The oil ETFs we track are commodities ETFs, meaning they track the price of oil through benchmarks such as the Brent Crude Oil or West Texas Intermediate benchmarks.
Is it wise to invest in energy?
Through her engaging content, Sarah strives to educate and guide investors on their journey towards financial success. The oil industry shows no signs of slowing down in the coming years, and investors should understand that the oil sector has shown losses since 2014 due to Best oil etf overabundance and downward-driven prices. As you can see, each oil ETF has its own pros and cons, allowing you to choose an aggressive or conservative approach to oil investment. The ETF invests almost entirely in 1 specific niche of the oil market, so it is exceptionally volatile and subject to seasonal and unexpected price fluctuations. At the same time, this makes the fund easy to research because you know the oil it tracks.
Global X S&P/TSX Capped Energy Index Corp Class ETF (HXE.TO)
This oil services ETF tracks the MVIS US Listed Oil Services 25 Index, which is a cap-weighted index that tracks the top oil services firms listed on US exchanges. The energy sector is vast and intricate, so there are hundreds of companies that provide dozens of different services in this industry. In 2025, a mix of traditional oil and gas leaders like ExxonMobil and renewable players like Ørsted or NextEra Energy offers balanced growth and stability. When implementing these strategies, investors should remain mindful of the unique characteristics of crude oil ETFs, particularly how they react in different market environments.
Find the best Oil ETFs/ETCs
Compared to broad energy sector ETFs, HOG has historically lower volatility given that its holdings have fixed service costs. As of February 2025, the ETF costs a MER of 0.74% and pays out distributions on a quarterly basis. Because of that, this ETF can be a great tool for investors to use to find top-notch dividend stocks to add to their income portfolio. Currently, the Schwab U.S. Dividend Equity ETF’s top two holdings are oil giants ConocoPhillips (COP 2.27%) and Chevron (CVX 1.42%). Here’s a closer look at this fund and why it loves those two leading oil stocks.
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The fund attempts to weight small-, mid- and large-cap stocks equally for a more diverse portfolio offering. The oil industry isn’t going away anytime soon, even with the global shift toward clean energy. In fact, the International Energy Agency (IEA) still expects oil demand to rise through 2030. Let’s face it, the oil market can be a right rollercoaster – prices up one minute, down the next, all depending on what OPEC’s had for breakfast. But despite the chaos, oil still powers our homes, cars, planes and global economy. So if you want a slice of the action without the hassle of picking individual companies, oil ETFs might be your ticket.
What the oldest active crude oil ETF?
Occidental is a major oil & gas producer with carbon capture and chemical business segments. And is still used by hundreds of banks, hedge funds, and brokerages to track the billions of dollars flowing in and out of stocks each day. It also owns a huge equity stake in another red-hot AI play, giving investors indirect exposure to multiple AI growth engines without paying a premium. In fact, it’s sitting on a war chest of cash—equal to nearly one-third of its entire market cap.
The oil company expects to add $10 billion to its annual free cash flow by 2026, fueled by high-margin production growth and cost-cutting initiatives. For perspective, last year, Chevron produced $15 billion in free cash flow and paid $11.8 billion in dividends. An oil ETF typically has only exposure to the price of oil as a commodity.
- As a result, the ETF’s top two holdings are currently ConocoPhillips (4.6% of its assets) and Chevron (4.4%).
- In other words, when XOM and CVX are the sector performance leaders, RSPG can’t keep up.
- However, it’s crucial to assess your financial goals, risk tolerance, and time horizon before investing.
- This makes the SPDR S&P Oil & Gas Equipment & Services ETF a less risky option when compared to other oil ETFs on the market.
The answer to this question depends on your time horizon, investment objectives, and risk tolerance. In general, an allocation to Canadian oil ETFs is best suited for long-term investors who are prepared to accept long periods of possible underperformance and high 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 Canadian energy sector has faced significantly less volatility than oil futures. Despite this, the Canadian energy sector has underperformed the broader Canadian market significantly over a long period of time.
Finding the best crude oil ETF requires careful consideration of several factors including expense ratios, tracking methodology, and the fund’s approach to navigating contango. Whether choosing futures-based or equity-based options, investors should align their selection with their investment goals, time horizon, and risk tolerance. They tend to earn steadier cash flow than oil and gas producers, making them better oil dividend stocks since they tend to pay high-yielding dividends. In early 2025, the ETF offered a dividend yield of more than 7.5%, making it ideal for investors seeking to generate passive income from the oil market.
- Despite the high fees, the fund has provided investors with an excellent rate of return.
- These funds typically track oil prices through futures contracts or related derivatives rather than holding physical barrels.
- On this page, neither the author nor The Motley Fool have chosen a “top stock” by personal opinion.
- 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.
Oil prices are subject to market risk and can decline significantly. Historical performance provides insights into how the ETF responds to market conditions. Compare the performance against oil price benchmarks, but consider the tracking error.
Schwab U.S. Dividend Equity ETF
When choosing an oil ETF or ETC one should consider several other factors in addition to the methodology of the underlying index and performance of an ETF. For better comparison, you will find a list of all oil ETFs/ETCs with details on size, cost, age, income, domicile and replication method ranked by fund size. Lastly, while clean energy is undoubtedly a vital part of the global energy transition, it occupies a niche of its own. So don’t expect to see any solar, wind or nuclear-focused ETFs on the list. Energy ETFs can help investors earn income, hedge against inflation or speculate on commodity prices.