Increased Investment Activity Could Energize Energy ETFs

ETF Trends

With the U.S. striking black gold in shale beds, major investors are throwing money at the growing U.S. energy sector. Retail investors can also capitalize on the shale oil boom through energy-sector related exchange traded funds.

“International trading companies have been buying assets all along, just not so much in America,” JP Fjeld-Hansen, managing director of Musket Corp., said in a Bloomberg article. “Now we’ve had this renaissance of U.S. energy markets and they’re bringing their capital here.”

Commodity traders are purchasing or building more physical assets in an attempt to get a piece of the oil shale pie and to profit on arbitrage opportunities between regions.

“You’ve got a situation in the U.S. with increasing production, which we expect to continue to increase, so significantly new streams, new places to go with those streams, those streams do need to be moved, and therefore a growing business,” Ian Taylor, Vitol’s chief executive officer, said in the article.

Skip York, vice president of Wood Mackenzie Ltd., points out that merchants haven’t been this active in the U.S. energy sector since the early years of the last decade.

“It’s hard to quantify what we’re seeing now because it’s unprecedented,” York said in the article. “We’ve never seen the trading houses make these many moves into the physical space in such a short period of time.”

ETF investors interested in accessing the growing energy industry in North America can take a look at the Market Vectors Unconventional Oil & Gas ETF (FRAK) . FRAK tracks energy companies that engage in new extraction techniques to produce oil from shale beds and oil sands. [Capture the U.S. Oil Boom with the Unconventional Energy ETF]

Additionally, hybrid MLP ETFs include exposure to master limited partnerships, which benefit from the increased flow of oil, and hold other energy infrastructure stocks. The Global X MLP & Energy Infrastructure ETF (MLPX) and Alerian Energy Infrastructure ETF (ENFR) are two passive, index-based options, whereas the First Trust North American Energy Infrastructure Fund (EMLP) is actively managed. [Hybrid Energy Infrastructure ETFs Could Outperform MLPs]

For more information on the energy sector, visit our energy category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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