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US Oil Crosses $70 First Time in 3 Years: ETFs in Focus

Zacks Equity Research
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Worries over U.S. sanctions on Iran have pumped up oil prices to more than $70 as it has threatened crude supplies from Iran. WTI futures for June have shot up to $70.69 a barrel on the New York Mercantile Exchange for the first time since November 2014 and Brent has risen to $75.55 a barrel on the London based ICE Futures Europe exchange (read: Oil Trading Above $70: Play the Surge With Leveraged ETFs).

Rationale Behind The Rise

Analysts in the oil market believe that the United States is looking to cancel the Iran nuclear deal, which will affect oil exports of Iran directly. In addition to this, OPEC countries under the output cut deal, are observing a decrease in production capacity that should be paving the way for a steep rise in oil prices. Venezuela has also lowered its oil production due to economic crisis. The tense situation in the Middle-East, following U.S. strikes on Syria and conflict in Yemen, has also pushed up oil prices. According to OPEC sources,   average production in the first half of 2018 is expected to be 1.54 million billion per day (bpd) compared with 1.77 million in the fourth quarter of last year.

ETFs With a Direct Bearing on Oil Industry

As oil prices are spiking, oil ETFs are also thriving. We have highlighted some funds that have been generating strong returns based on the average returns of the last four weeks (read: all the Energy ETFs here).

PowerShares S&P SmallCap Energy Portfolio PSCE

PSCE measures performance of common stocks of US energy companies. It has an expense ratio of 0.29%. The fund’s average daily volume of trade is 55,000 while its AUM is $64 million. The fund holds 31 stocks and has gained 23% in the past four weeks. PSCE has a Zacks ETF Rank #3 (Hold).

First Trust NASDAQ Oil & Gas ETF FTXN

FTXN provides exposure to the oil and gas companies within the United States. The expense ratio of the fund is 0.60%. It holds 50 stocks, with Valero Energy Corp (VLO 8.04%), Philips 66 (PSX 7.81%) and Marathon Petroleum Corp (MPC 7.63%) as the top three firms. The ETF manages assets worth $4.7 million. The average daily volume of shares traded is 6000. FTXN has gained 16.9% based on the past four-week data. The fund has a Zacks ETF Rank #3.

iShares U.S. Oil Equipment & Services ETF IEZ

This fund tracks investment results that match the price and yield performance of Dow Jones US Select Oil Equipment and services index. The average daily volume of trade is 87,000 and AUM stands at $234 million. The fund is made up of 35 stocks, with Schlumberger NV (SLB 15.19%) and Halliburton Co (HAL 10.65%) as the top two stocks. IEZ has an expense ratio of 0.44%. The fund was up 15.3% in the past four weeks and has a Zacks ETF Rank #4 (Sell) (read: 5 Best-Performing Energy ETFs & Stocks of April).

SPDR S&P Oil & Gas Equipment & Services ETF XES

XES tracks the S&P Oil & Gas Equipment & Services Select Industry Index. The fund has an expense ratio of 0.35% and an average volume of 803,000 per day. The asset under management of XES is 389.4 million. The fund is composed of 39 stocks. Notably, none of the stocks control more than 4.12% of the basket. The fund has gained 18.6% in the past four weeks and carries a Zacks ETF Rank #5 (Strong Sell).

PowerShares DWA Energy Momentum Portfolio PXI

PXI follows the Dorsey Wright Energy Technical Leaders Index. It has an expense ratio of 0.60% and average daily volume of 15,000. The fund manages assets of $94.8 million and comprises of 42 stocks, with none controlling more than 5%. The Zacks ETF Rank #3 fund has returned 16.9% over the past four weeks.

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ISHARS-US OIL E (IEZ): ETF Research Reports
 
PWRSH-DW EGY MO (PXI): ETF Research Reports
 
PWRSH-SP SC EGY (PSCE): ETF Research Reports
 
SPDR-SP O&G EQP (XES): ETF Research Reports
 
FT-NDQ OIL&GAS (FTXN): ETF Research Reports
 
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