best oil etf: 4 Best Oil ETFs for 2023

best oil etf: 4 Best Oil ETFs for 2023

wti crude oil


However, it still offers fairly broad exposure to the entire energy sector, with its top 10 holdings featuring several refinery stocks and a large oilfield services company. Oil ETFs seek to replicate the price movement of an oil benchmark, such as the WTI or Brent crude. Many oil ETFs utilize futures contracts, so shareholders of these ETFs do not take possession of the physical asset. Investors should keep in mind that the price of oil can significantly fluctuate in the short term.

But do consider consulting your tax advisor when deciding how to invest in MLPs. These types of companies typically feature much higher yields than exploration-and-production, refinery and distribution companies – evident in AMLP’s juicy 7%-plus yield. “Barclays suspends sales of two products linked to oil, volatility.” Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate.

fund’s holdings

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ETF Screener

While investing in commodities like oil can help diversify a portfolio and hedge against inflation, daily supply-and-demand fluctuations tend to impact prices. Anyone looking to add oil ETFs or oil-related stocks to their portfolio should consider current oil market conditions before investing. To make our list of best oil ETFs by market performance, we measure the top performance for 1-year returns, through January 31, 2022. Investors should keep in mind that past performance is no guarantee of future results and that oil ETFs invest in futures contracts, which can produce large, unpredictable swings in price.

The United States 12 Month Oil Fund LP closely tracks the spot price of light, sweet crude using an average of the 12 nearest-month NYMEX WTI crude oil futures contracts. Spreading the contracts out over 12 months reduces the fund’s sensitivity to short-term fluctuations in spot oil prices. Note, however, that the fund’s structure could result in a K-1 at tax time.

ETNs are generally considered riskier investments than ETFs. There are six distinct oil commodity ETFs that trade in the United States, excluding inverse and leveraged ETFs as well as funds with less than $50 million inassets under management . Oil prices, as measured by the Bloomberg Composite Crude Oil Subindex, have climbed 28% over the past 12 months, significantly outperforming the S&P 500 Index’s 14% drop, as of Nov. 18. United States Brent Oil Fund, iPath Pure Beta Crude Oil ETN, and United States Oil Fund LP are top-performing funds tracking oil futures contracts.

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The ETF’s benchmark is a near-month futures contract that is traded on the ICE Futures Exchange. Because Brent Crude often trades at a different price from West Texas Intermediate , BNO can be a useful way of gaining alternative exposure. Its primary holdings are Brent Crude oil futures contracts. OIL is structured as an exchange-traded note , which is an unsecured debt security that trades like a stock. The benchmark mirrors the returns through an unleveraged investment in futures contracts in the crude oil market.

How to Allocate Commodities in Portfolios

The Index may combine several contracts with different expiration dates. The metric calculations are based on U.S.-listed ETFs that are classified by ETF Database as being mostly exposed to a specific commodity. If an ETF changes its commodity classification, it will also be reflected in the investment metric calculations. The calculations exclude all other asset classes and inverse ETFs. OILK offers exposure to three separate WTI oil futures contracts. The first follows a monthly roll schedule while the second and third hold June through December contracts, which are rolled every March and September, respectively.

In fact, you could argue that the heavy allocations to Exxon and Chevron act as ballast because parts of these integrated majors’ businesses can still profit even when oil prices aren’t rising. USO is structured as a commodity pool and targets a benchmark that is the near-month WTI crude oil futures contract for light, sweet crude oil delivered to Cushing, Oklahoma. The contract is traded on the New York Mercantile Exchange . USO invests in other oil-related contracts, and may invest in forwards and swap contracts.

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If you’re curious about investing in oil, oil ETFs are an easy way to do so. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.

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BNO’s returns also outperform the commodity index in longer periods. However, USO’s longer period returns are far lower than the S&P 500. However, USO’s longer period returns are far lower compared to a basket of commodities or to the S&P 500. Income-minded investors might prefer our next pick to many of the other still-generous dividend payers on this list.

Contango is a situation in which the futures price of a commodity is above the spot price. Full BioNathan Reiff has been writing expert articles and news about financial topics such as investing and trading, cryptocurrency, ETFs, and alternative investments on Investopedia since 2016. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.

They tend to earn steadier cash flow than oil and gas producers, enabling them to pay high-yielding dividends. In late 2022, the ETF offered a dividend yield approaching 8%, making it ideal for investors seeking to generate passive income from the oil market. The Alerian MLP ETF is a fund that allows investors to target energy infrastructure midstream master limited partnerships . These companies make money by providing midstream services such as operating pipelines or liquefied natural gas export facilities. The United States Brent Oil Fund LP is considered a good alternative to the S&P GSCI Crude Oil benchmark, outperforming it over one, three and five years. Before jumping in on BNO, investors should note the short-term focus of this oil ETF, which is highly sensitive to daily oil price fluctuations.

NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance. The fund’s fact sheet recommends that investors buying or selling USL should consider using limit orders, where you specify the maximum price to pay or the minimum price to sell, to manage spreads. China country-specific ETFs could be among the most at risk if crude oil disruptions and high… “Europe has intensified its efforts to build clean energy infrastructure as it seeks to wean itself off Russian energy. The clearest example of that is the European Commission’s RePower EU Plan,” Johnson adds.

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Russia’s war with Ukraine, higher travel demand and other drivers sent U.S. crude oil prices from around $75 at the start of 2022 to multiple peaks above $120 across the year. North Sea Brent Crude is a light-sweet blend of crude oil whose price serves as a benchmark to the majority of worldwide oil markets. The sole holding of USO is futures contracts of WTI sweet light crude oil.

It’s worth noting that in both the short- and long-term alike, U.S.-based energy stocks have outperformed their international peers. But if you’re looking to defray a little geographic risk, this is one of the best energy ETFs to do so while still printing a nice profit from higher global commodity prices. The following oil ETFs are commodities ETFs, meaning they track the price of oil through benchmarks such as the Brent Crude Oil or West Texas Intermediate benchmarks. They let an investor gain exposure to the oil market and potentially profit from an upcycle.