10 Best Oil & Gas ETFs to Buy in 2021

  


BEST OIL AND GAS ETFs

Exchange Traded Funds are the easiest and safest investment to take advantage of the huge oil and gas sector all the while protecting your investment from the volatility of this sector. ETFs are a great addition to the investment portfolio. They offer a low-cost option to get exposure to the oil and gas sector.

To give investors an idea where to start and which companies to look for investment, we have compiled a list of top 10 ETFs to buy in 2021. Previously, we also covered best ETFs to buy in all categories. Below are one of the most pivotal investment products for investors because of their benefits and low risk.

Sr. ETF Name Symbol Total Assets ($000) YTD (%)
1. United States Gasoline Fund UGA $106,551 33.12
2. Invesco DB Oil Fund DBO $506,539 31.44
3. iPath Pure Beta Crude Oil ETN OIL $53,432 30.66
4. ProShares K-1 Free Crude Oil Strategy ETF OILK $84,100 30.15
5. United States Brent Oil Fund BNO $334,130 30.12
6. United States Oil Fund USO $2,986,690 29.48
7. United States 12 Month Oil Fund USL $209,799 28.04
8. Energy Select Sector SPDR Fund XLE $22,024,000 >27.01
9. RICI-Energy ETN RJN $3,343 >26.07
10. Invesco DB Energy Fund DBE $88,179 25.91

 

1. United States Gasoline Fund (UGA)

The United States Gasoline Fund is an exchange-traded security that is designed to track in percentage terms the movements of gasoline prices. United States Gasoline Fund offers the following three benefits to its investors:

  1. Offers commodity exposure without using a commodity futures account
  2. Provides options of intra-day pricing, and market, limit, and stop orders
  3. Also gives portfolio holdings, market price, NAV, and TNA on its website each day

This ETF was launched in 2008; it has an expense ratio of 0.75%.

UGA majorly invests in listed RBOB futures contacts and other gasoline futures contracts. These investments are collateralized by cash, cash equivalents, and US government obligations with remaining maturities of two years or less. Based on the nature of this fund, UGA is more towards offering a short-term tactical tilt towards a specific corner of the energy market.

The below chart shows a detailed picture of the ETFs Net Asset Value historical trend since April 2020:

United States Gasoline Fund (UGA)The below chart shows the price trend of the UGA for the last two years:

United States Gasoline Fund (UGA)The ETF price took a massive blow, dropped more than 50% in value when Covid reached pandemic status. Since then, it has managed to rise back to the pre-covid level in the market.

2. Invesco DB Oil Fund (DBO)

Invesco BD Oil Fund provides exposure to light sweet crude oil (WTI), which is the most popular oil benchmark in the world. This ETF is designed for investors who want a cost-effective and convenient way to invest in commodity futures. DBO is not for every investor because of its high-risk nature. The investments are of speculative nature which takes place in a highly volatile environment.

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The benefit DBO provides to its investors are:

  1. Enhanced Commodity Index – This fund follows a more sophisticated strategy than other commodity indexes
  2. Cost Savings – There is no cost of storing a physical commodity or the cost of entering into a commodity-linked note with a dealer
  3. Interest Earned – This fund collateralizes its futures contracts primarily with US Treasury securities, money market funds, and T-Bill ETFs and earns interest on these securities.
  4. Transparency and Liquidity – This fund invests in liquid futures contracts at publicly available prices determined by trading on regulated futures exchanges.

DBO was launched in 2007 and has an expense ratio of 0.75%.

The below chart shows the price trend of the DBO for the last two years:

Invesco DB Oil Fund (DBO)This ETF was hit pretty hard by the pandemic, as shown in the above chart. The index lost more than 50% of its value in March-20. DBO has managed to recover itself pretty well and has been able to reach the same value.

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3. iPath Pure Beta Crude Oil ETN (OIL)

This iPath Pure Beta Crude Oil ETN tracks crude oil. Crude oil is one of the most important resources in the world. This note tracks the S&P GSCI Crude Oil Total Return Index. This index reflects the returns that are available through an unleveraged investment in the West Texas Intermediate (WTI) crude oil futures contract.

This ETF was launched in 2011 and has an expense ratio of 0.75%. Just recently Barclays Bank announced that the expense ratio of OIL will be rescued to 0.57%. This is likely to attract more investors.

The below chart shows the price trend of the OIL for the last two years:

iPath Pure Beta Crude Oil ETN (OIL)This ETF was a bit late in showing the effects of Covid but it did drop drastically. It dropped to $8.11 in May’20 (from $19.62 in January 2020). The index has now recovered and is currently trading at a price above $18. This amazing recovery makes this the best crude oil ETF to buy in 2021.

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4. ProShares K-1 Free Crude Oil Strategy ETF (OILK)

ProShares K‑1 Free Crude Oil Strategy ETF tracks three separate contracts scheduled for West Texas Intermediate crude oil futures. This index offers the below to investors:

  • Streamlined tax reports
  • The fund’s benchmark is an index of crude oil futures contracts
  • The spot price of WTI crude oil is not linked to the performance of this index

This ETF was launched in 2016 and has an expense ratio of 0.68%.

The below chart reflects the index performance from Dec-2020 till April 2021. The ETF is on an upward trend, in terms of return, in the past 6 months as reflected below:

ProShares K-1 Free Crude Oil Strategy ETF (OILK)The below chart shows the price trend of the OILK for the last two years:

ProShares K-1 Free Crude Oil Strategy ETF (OILK)This index was also hit pretty hard during Covid. Since then, it is on the path to recovery and is progressing at a comparatively slow rate.

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5. United States Brent Oil Fund (BNO)

The United States Brent Oil Fund tracks Brent Crude Oil Brent Crude is the benchmark for the EMEA region and often trades at a different price than WTI. This index offers its investors:

  • Exposure to commodities without a futures account
  • Provides intra-day pricing, and market, limit, and stop orders
  • Regularly updated portfolio holdings, market price, NAV, and TNA on its website each day

United States Brent Oil Fund was launched in 2010 and has an expense ratio of 0.9%.

The below graph shows the Net Asset Value history of the index. The NAV of BNO has been continuously growing as reflected below:

United States Brent Oil Fund (BNO)The below chart shows the price trend of the OILK for the last two years:

United States Brent Oil Fund (BNO)Like other ETFs, this index also took a huge dip in price when Covid-19 hit. After reaching the low level of $6.63, the index has been gradually improving and has reached beyond $16.

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6. United States Oil Fund

This United States Oil Fund tracks the most important commodity, that is oil. It provides investors exposure to the oil market through crude oil futures contracts and other oil-related contracts. This fund is also a major attraction for investors as it acts as an inflation hedge.

The index has its own set of benefits which it provides to its investors:

  • Regular updated intra-day pricing, and market, limit, and stop orders
  • Regularly updated portfolio holdings, market price, NAV, and TNA on its website
  • Also gives a forecasted portfolio based on market conditions and regulatory requirements

United States Oil Fund was launched in 2006 and has an expense ratio of 0.79%

The below chart shows the price trend of the USO for the last two years:

United States Oil FundThis index was also hit hard by the Covid. Due to complete lockdown, the supply of oil inflated while the demand dropped significantly. This led to a huge drop in the price of USO which tracks crude oil. The index is on the path to recovery and is performing better.

7. The United States 12 Month Oil Fund (USL)

The United States 12 Month Oil Fund tracks the spot price of light, sweet crude oil delivered to Cushing, Oklahoma. The fund majorly invests in futures contracts for light, sweet crude oil, other types of crude oil, diesel-heating oil, gasoline, natural gas, and other petroleum-based fuels

This ETF was launched in 2007 and has an expense ratio of 0.88%.

The below chart shows the price trend of the USL for the last two years:

The United States 12 Month Oil Fund (USL)Like other oil ETFs, USL also was adversely affected by Covid-19 and the resultant lockdown. The reduction in the supply of oil had its impact on the price of the index which dropped more than 50%. After hitting the lowest mark of $10.35, the index has improved itself and has fully recovered the loss by March-2021.

8. Energy Select Sector SPDR Fund (XLE)

The Energy Select Sector SPDR is the oldest exchange-traded fund to focus on the energy business. This fund offers diversified exposure in the oil, coal, and natural gas industries. With over $22 Billion net assets, the fund is one of the largest ETFs. This fund offers its investors:

  • Results that correlate with the price and yield performance of the Energy Select Sector Index
  • Effectively reflects the energy sector of the S&P 500 Index
  • Strategic or tactical positions that are more focusses as compared to additional ETFs investing decisions

The fund holding as of April 22, 2021, is as below:

Sr. # Name Shares Held Weightage
1. Exxon Mobil Corporation 91,127,490 23.04%
2. Chevron Corporation 48,051,904 22.19%
3. EOG Resources Inc. 15,685,384 4.90%
4. Schlumberger NV 37,583,410 4.34%
5. ConocoPhillips 18,666,702 4.22%
6. Marathon Petroleum Corporation 17,505,364 4.17%
7. Phillips 66 11,740,628 4.03%
8. Kinder Morgan Inc Class P 52,328,850 3.92%
9. Pioneer Natural Resources Company 5,530,403 3.70%
10. Williams Companies Inc. 32,624,928 3.47%

 

The index has invested in the major chunk of its portfolio in the biggest corporations of the sector as shown in the table above.

XLE was launched in 1988 and has a very low expense ratio of 0.12%. Such a huge portfolio of companies at a surprisingly low expense ratio makes XLE one of the best ETFs to buy for 2021. Renewable energy stocks have been very popular in the year 2020 and their popularity continues to increase in 2021.

The below chart shows the price trend of the XLE for the last two years:

Energy Select Sector SPDR Fund (XLE)

9. ELEMENTS Rogers International Commodity Index Energy ETN- RJN

The ELEMENTS Rogers International Commodity Index Energy ETN is linked to the performance of the Rogers International Commodity Index -Energy Total Return. The index reflects the value of 6 energy commodity futures contracts. RJN is also a sub-index of the Rogers International Commodity Index-Total Return.

The index was launched in 2007 and has an expense ratio of 0.75%.

The below chart shows the price trend of the RJN for the last two years:

ELEMENTS Rogers International Commodity Index Energy ETN- RJNAfter a tremendous drop due to Covid-19, the index value is gradually improving.

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10. Invesco DB Energy Fund- DBE

The Invesco DB Energy Fund follows the DBIQ Optimum Yield Energy Index Excess ReturnTM (DBIQ Opt Yield Energy Index ER or Index. This fund is for those investors who want to invest cost-effectively and conveniently in commodity futures. The Index is a rules-based index composed of futures contracts on some of the most heavily traded energy commodities in the world – light sweet crude oil (WTI), heating oil, Brent crude oil, RBOB gasoline, and natural gas.

This ETF was launched in 2007 and has an expense ratio of 0.75%.

The top holdings of DBE as of March 31, 2021, are as below:

Sr. # Futures Weightage (%)
1. WTI Crude 24.15
2. Gasoline 23.92
3. NY Harbor ULSD 23.09
4. Brent Crude 21.95
5. Natural Gas 6.89

 

The below chart shows the price trend of the DBE for the last two years:

Invesco DB Energy Fund- DBEAfter a huge drop because of Covid-19, the index has shown remarkable recovery and has almost reached the pre-Covid valuation.

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