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Tap Oil with Best Energy ETFs & Stocks YTD

Sweta Killa
Ross Stores (ROST) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.

Oil price has been on a solid run in the past couple of months with Brent hovering near $80 per barrel, the highest since 2014, and U.S. crude trading above $72 per barrel. The rally has been driven by several factors that point to a rebalancing of the oil market and increase in investors’ optimism.

In particular, Iran and Venezuela are playing an important role in driving oil price higher. This is especially true as Donald Trump finally withdrew from the Obama-era 2015 nuclear deal and vowed to re-impose all the powerful economic sanctions against the OPEC nation within the deal as well as bring new ones. Since Iran is OPEC's third-largest oil producer and exports about 2.5 million barrels a day, renewed sanctions would reduce Iranian oil exports, further tightening global supplies and pushing oil prices higher (read: ETFs & Stocks in Focus as Trump Reimposes Sanction on Iran).

The potential U.S. sanctions on Venezuela after the second six-year term victory of President Nicolás Maduro would further curtail oil output from the country. Output of the OPEC-member has already been halved since 2005 to below 2 million barrels per day due to an economic crisis. All these are further tightening excess global supplies.

The historic output cut deal, wherein OPEC, Russia and other producers have agreed to curb production by 1.8 million barrels per day is already paying off. The group started curtailing output in January last year and is likely to continue through 2018. Further, oil inventories in the world’s richest nations have now fallen 1 million barrels below the five-year average, the level targeted by the OPEC and its partners, as the group restrains crude output for a second year.

Coming to demand side, accelerating economic growth across the world has been raising demand for the commodity but the International Energy Agency (IEA) warned that it would likely moderate as crude nears $80 per barrel. The agency cut its forecast for global demand growth to 1.4 million barrels per day for 2018, from a previous estimate of 1.5 million barrels per day.

The bullish trend is likely to continue at least in the short term. Given this, investors might want to tap the space with the top-performing energy ETFs and stocks of this year. For them, we have highlighted five funds and stocks that are poised to perform well, should oil prices rise.

First Trust Nasdaq Oil & Gas ETF FTXN

This fund follows the Nasdaq US Smart Oil & Gas Index, which measures the performance of the most liquid oil and gas securities from the NASDAQ US Benchmark Index screened through volatility, value and growth.

Zacks Rank: #3 (Hold)
AUM: $11.5 million
Expense Ratio: 0.60%
YTD Return: 21.5%

PowerShares S&P SmallCap Energy Fund PSCE

This fund offers exposure to the small-cap segment of the energy sector by tracking the S&P Small Cap 600 Capped Energy Index (read: 5 Small-Cap ETFs & Stocks Crushing Russell 2000).

Zacks Rank: #3
AUM: $78.7 million
Expense Ratio: 0.29%
YTD Return: 20.3%

SPDR S&P Oil & Gas Exploration & Production ETF XOP

This fund provides exposure to the oil and gas exploration companies by tracking the S&P Oil & Gas Exploration & Production Select Industry Index.

Zacks Rank: #3
AUM: $3.5 billion
Expense Ratio: 0.35%
YTD Return: 19.1%

iShares U.S. Oil & Gas Exploration & Production ETF IEO

This product offers exposure to U.S. companies that are engaged in the exploration, production, and distribution of oil and gas and follows the Dow Jones U.S. Select Oil Exploration & Production Index (read: Top Performing Energy ETFs of 2018).

Zacks Rank: #3
AUM: $513 million
Expense Ratio: 0.44%
YTD Return: 19.1%

PowerShares Dynamic Energy Exploration & Production Portfolio PXE

This product follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value.

Zacks Rank: #3
AUM: $59.5 million
Expense Ratio: 0.80%
YTD Return: 18.4%

W&T Offshore Inc. WTI

This is an independent oil and natural gas company focused primarily in the Gulf of Mexico area, including the deep water.

Zacks Rank: #3
VGM Score: A
Market Cap: $1.21 billion
YTD Return: 162.2%

Profire Energy Inc. PFIE

The company is engaged in manufacturing, installing and servicing oilfield combustion management systems and related burner products.

Zacks Rank: #2 (Buy)
VGM Score: B
Market Cap: $223.1 million
YTD Return: 138%

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Seadrill Limited SDRL

This is an international offshore drilling contractor providing drilling and well services.

Zacks Rank: #3
VGM Score: D
Market Cap: $272.4 million
YTD Return: 133.5%

Pioneer Energy Services Corp. PES

This is a provider of land contract drilling services and production services to independent and major oil and gas exploration and production companies (see: all the Energy ETFs here).

Zacks Rank: #2
VGM Score: B
Market Cap: $482.4 million
YTD Return: 103.3%

Denbury Resources Inc. DNR

This oil and gas company is engaged in the exploration, production and development of natural gas properties in the Gulf Coast region located in Mississippi, Texas, Louisiana, and Alabama.

Zacks Rank: #3
VGM Score: B
Market Cap: $1.97 billion
YTD Return: 102.7%

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