ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Direct Indexing
    • Disruptive Technology
    • Energy Infrastructure
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Financial Literacy
    • Fixed Income
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Modern Alpha
    • Night Effect
    • Portfolio Strategies
    • Responsible Investing
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. ETFs to Play Oil’s Wild Ride
News
Share

ETFs to Play Oil’s Wild Ride

Stoyan BojinovDec 08, 2015
2015-12-08

Oil bears were awakened Monday as OPEC officials failed to address the ever expanding supply glut, which sent crude futures down over 5% on that day.

Last Friday’s upbeat jobs report reinforced rate hike fears in time for the Fed’s upcoming policy later this month, which only added to the clouds of uncertainty looming over the already fragile oil market. The concern here is that an interest rate hike announcement come December 16th would serve as yet another tailwind for the stubbornly strong U.S. dollar, putting more downward price pressure on commodities like crude oil.

Is This the Next Leg Lower for Crude Oil?

OPEC’s inaction to curb oil production, matched with U.S. dollar strength and lackluster global economic growth, hasn’t done much to help oil prices stabilize. To put Monday’s price plunge in perspective, consider the price of oil from 1995 to 2015 from Bloomberg:


Content continues below advertisement

historical oil price

Alas, “black gold” has long been plagued with volatility, and the recent collapse likely hasn’t surprised too many market historians.

Energy Equities Are Holding Above Support…For Now

Before examining the various exchange-traded options that offer exposure to oil prices, let’s consider how oil-related equities have fared since the broad market bottom seen during late August of this year.

Below is the returns comparison between various corners of the oil market, including: broad based Energy sector (XLE A), oil producers & explorers (XOP B+), oil services (OIH B+), and of course the price of oil as represented by (USO B). Note the specific time frame here, 8/24 – 12/7/2015, is meant to showcase returns as of the August lows, and what appeared to be the bottom for energy assets prior to Monday’s sell-off.

oil etfs head to head

Key takeaways:

  • Even after a prolonged sell-off since June of 2014, crude oil prices remain quite volatile, showing little prospects of bottoming out any time soon. For perspective, USO rebounded 27% in a matter of days following the August crash. It has since lost all that and then some, trading down 6% from its previous lows.
  • The oil services group (OIH B+) remains in positive territory even after the latest oil futures sell-off. This isn’t terribly surprising, since the profitability of the service companies in the oil industry isn’t nearly as dependent as that of the producers & explorers (XOP B+), which happen to be the worst performers on the equity side.

Looking ahead from a purely technical perspective, we see that if oil-related equities were to follow in the footsteps of crude prices, as they have done for the last year, then it’s likely that energy names are in for another shakeout and lower lows, much to the bottom pickers’ frustration.

Outlook for Oil Prices

The last time Goldman Sachs predicted oil could sink as low as $20 a barrel in September of this year, everyone thought they were joking, since crude prices were on the rebound then. Fast forward to today and that forecast doesn’t seem as far-fetched.

It’s certainly possible for oil prices to stabilize at an unforeseen level and carve out a bottom that catches most of us off-guard. In fact, that’s probably how it will go down…eventually. For the time being however, it appears that fundamental risks and technical weakness are likely to continue paving the way for lower oil prices.

Ways to Play Crude Oil Volatility with ETFs

Investors have a multitude of options for gaining exposure to oil prices: they can either do so tangentially; via energy-focused equity ETFs; or more directly, via commodity-based ETPs. In addition to the few funds highlighted above, consider the following:

  • Broad Energy ETFs
  • Oil & Gas Exploration & Production ETFs
  • Oil Equipment & Services ETFs
  • Unconventional Oil & Gas ETFs
  • Crude Oil ETPs

The Bottom Line

Oil-related assets are as cheap as ever once again, in light of continued weakness in the energy futures market. The crude oils’ volatile nature has only made it more difficult for value investors. The biggest factors at work driving oil prices lower aren’t showing signs of reversing yet, so be careful with “bargain priced” buys in the energy sector right now.

Follow me @SBojinov

» Popular Pages

  • Tickers
  • Articles

May 26

Main Management Market Note: May 26, 2023

May 26

Family Offices Embrace Crypto, While Needing Support

May 26

ETF Issuer League: Avantis, Summit Up, Global X

May 26

Active ETFs Positioned Better for Opportunities in High-Yield Bonds

May 26

Insurers Own Major Stakes in Fixed Income ETFs

May 26

Cash Flow Kings at Home With These ETFs

May 26

Counter U.S. Default Risk With Foreign Equity ETF AVDE

May 26

Vangaurd's EM Bond ETF Surprises With Fixed Income Protection

May 26

The Economy Matters: PCE, GDP, Durable Goods & Employment Numbers

May 26

SPYI Captures Huge Single Day Nvidia Pop, Enhances Income

QQQ

Invesco QQQ Trust

SPY

SPDR S&P 500 ETF Trust

BOTZ

Global X Robotics &...

VGT

Vanguard Information...

VOO

Vanguard S&P 500 ETF

SMH

VanEck Semiconductor ETF

XLK

Technology Select Sector SPDR...

VTI

Vanguard Total Stock Market...

IYW

iShares U.S. Technology ETF

SOXX

iShares Semiconductor ETF


Content continues below advertisement

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X