Assets Under Management AUM

Oil ETFs must watch if Iran deal collapses

In April, we discussed the possibility of President Biden’s administration relaunch the 2015 nuclear deal with Iran and consequently the lifting of the country’s oil sanctions. We speculated that while Iran joined the ranks of major oil exporters as early as 2021 after a three-year layoff was likely to cause some concern in nervous markets, such a move wouldn’t necessarily upset the delicate balance of OPEC + supply. tried to reach.

Well, these concerns have just been taken further, with a troubled Iran nuclear deal pushing key oil and gas ETFs higher.

Oil prices fell nearly 3% last week after Iranian President Hassan Rouhani said the United States was ready to lift sanctions on his country’s oil, banking and maritime sectors.

However, the speaker of Iran’s parliament painted a very different picture on Sunday after announcing that a three-month monitoring agreement between Iran and the UN nuclear watchdog had expired and his access to footage of the interior of some Iranian nuclear sites would cease.

Brent crude oil futures for July climbed nearly 2%, to $ 67.69 a barrel, while US West Texas Intermediate (WTI) for July rose by a similar margin to 64, $ 73 per barrel.

Meanwhile, major oil ETFs such as the VanEck Vectors Oil Service FNB (OIH) have made strong strides after the last development.

Is it only a temporary reprieve?

Analysts say the bull’s case remains intact whether or not Washington and Tehran strike a new deal.

Overall, it seems like it’s only a matter of time before the parties involved put their pen to paper on a new nuclear deal. Investors brace for another wave of what will surely be heavily discounted Iranian crude“said Stephen Brennock of oil broker PVM.

However, according to Brennock, despite all this alarmism, an aggressive increase in Iranian production and exports is unlikely to stop the decline in global oil stocks.

Goldman Sachs analysts strongly agree, saying the case for higher prices remains intact even with Iranian exports increasing due to increased global demand for vaccines.

Given the ongoing bullish outlook, here are some key oil ETFs to consider for your portfolio.

SPDR ETF # 1 in the Energy Sector (XLE)

ASG: $ 24.3 billion

Expense ratio: 0.12%

Dividend yield: 4.0%

Cumulative returns: 37.5% With over $ 24 billion in assets under management (AUM), ETF Energy Select Sector SPDR (NYSEARCA: XLE) is the largest fund dedicated to energy. Unsurprisingly, it’s also the most liquid and has a low expense ratio of just 0.12%, making it one of the cheapest oil ETFs to own.

Related: Oil Prices Rise At The Beginning Of The Driving Season

XLE is designed to track the price and return performance of companies in the Energy Select sector index. The index is therefore able to offer investors broad exposure to companies in the oil, gas and energy equipment sectors. However, one of its significant shortcomings is that XLE only has 26 stocks in its portfolio, with ExxonMobil (NYSE: XOM) and Chevron Corp. (NYSE: CVX) overrepresented with weightings of 22.7% and 21.6%, respectively.

As of this writing, XLE is trading at $ 52.11 per unit.

# 2 Vanguard Energy ETF (VDE)

ASG: $ 4.1 billion

Expense ratio: 0.10%

Dividend yield: 3.42%

Cumulative returns: 40.2%

Vanguard funds are popular because they are cheap and the Vanguard Energy ETF (NYSEARCA: VDE) stuck to this philosophy with an expense ratio of just 0.10%. It is also better diversified than XLE, with 97 stocks in its portfolio, but with fewer assets under management. Exxon and Chevron are still overrepresented, with respective weightings of 22.2% and 18.2%.

VDE monitors the performance of MSCI US Investable Market (IMI) Index / Energy 25/50, an index composed of stocks of large and mid-capitalization US energy companies. VDE is currently trading at $ 72.68 per unit.

# 3 SPDR S&P Oil and Gas Exploration and Production ETF (XOP)

AUM: $ 3.9 billion

Expense ratio: 0.35%

Dividend yield: 1.52%

Cumulative returns: 52.2%

ETF SPDR S&P Exploration and production of oil and gas (XOP) is a great ETF for investors who don’t just settle for a vanilla fund that targets obvious energy candidates, not to mention that it has significantly outperformed bigger ETFs like XLE this year. ETF invests in 53 exploration and energy production companies and is quite diversified: its first participation, Hess Corp. (NYSE: HES) weighs just 3.20%.

That said, diversification isn’t always what it claims to be. XOP’s high exposure to smaller energy companies can lead to very high volatility when oil markets get choppy. One unit of XOP is currently changing hands at $ 89.04.

# 4 VanEck Vectors Oil Services FNB (OIH)

ASG: $ 985.0 million

Expense ratio: 0.35%

Dividend yield: 0.90%

Cumulative returns: 39.0%

VanEck Vectors Oil Services ETFs (NYSEARCA: OIH) is an energy fund that takes a different approach to the Oil Patch by investing in stocks of oil service companies such as Schlumberger (NYSE: SLB), Halliburton Co. (NYSE: HAL), and Baker Hugues (NYSE: BKR) instead of integrated energy companies like Chevron and Exxon.

OIH owns a total of 26 shares of oil service companies and generally enjoys high liquidity. OIH is trading at $ 214.11 a pop.

# 5 VanEck Vectors Unconventional Oil and Gas ETF (FRAK)

AUM: $ 17.4M

Expense ratio: 0.54%

Dividend yield: 1.01%

Cumulative returns: 56.9%

With an AUM of less than $ 20 million, the VanEck Vectors Unconventional Oil & Gas ETFs (FRAK) is one of the smallest oil and gas funds. However, that didn’t stop him from outperforming his much bigger peers.

FRAK seeks to reproduce as faithfully as possible, before costs and expenses, the price and yield performance of the MVIS Global Unconventional Oil and Gas index, which aims to monitor the overall performance of companies involved in exploration, development, the extraction and / or production of unconventional oil and natural gas, which means that shale companies are well represented.

The ongoing rise in oil prices has given a massive lifeline to US shale companies, hence their exceptional returns.

FRAK is currently changing hands at $ 120.01 per unit.

The 10 main titles of FRAK are:

  • Pioneer Natural Resources Co. (NYSE: PXD) – 8.12%
  • ConocoPhillips (NYSE: COP) – 7.20%
  • EOG Resources Inc. (NYSE: EOG) – 7.18%
  • Devon Energy Corp. (NYSE: DVN) – 6.14%
  • Hess Corp. (NYSE: HES) – 6.06%
  • Western Oil Company. (NYSE: OXY) – 5.87%
  • Cenovus Energy Inc. (NYSE: CVE) – 4.89%
  • Diamondback Energy Inc. (NASDAQ: FANG) – 4.75%
  • Cimarex Energy Co. (NYSE: XEC) – 4.65%
  • Tourmaline Oil Company. (TSE: TOU) – 4.59%

By Alex Kimani for Oil Octobers

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