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4 Energy ETF Areas Better Positioned Amid Negative Oil
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With demand sinking amid coronavirus-led lockdowns and supply overflowing, energy companies are now looking only for storage — something that global oil producers and refiners are running short of. The crisis aggravated on Apr 20 as the May contract for U.S. WTI crude oil, which expires on Tuesday, dropped below zero for the first time in history.
However, the contract recovered later and was priced $0.0100 at the time of writing, while the June contract for the commodity was trading at about $19 per barrel. WTI crude ETFUnited States Oil Fund, LP (USO - Free Report) and Brent ETF United States Brent Oil Fund, LP (BNO - Free Report) lost about 11% and 6.9% on Apr 20. Notably, the price of oil continued to decline even after OPEC and its allies agreed to the biggest-ever production cut (read: OPEC Output Deal Cut: Will It Help Oil & Energy ETFs?).
Along with the commodity oil, explorers’ ETFs lost heavily. Energy Select Sector SPDR Fund (XLE - Free Report) lost 3.1% on Apr 20. Against this backdrop, below we highlight a few energy ETF areas that gained/lost little in the latest oil market rout.
Natural Gas
Per some analysts, with the shutting-in of oil wells (due to low prices), producers will also lose on some associated natural gas production. Plus, forecast of inclement weather both on the east and west coast, has probably boosted demand for natural gas. iPath Series B Bloomberg Natural Gas Subindex Total ReturnSM ETN added 7.8% on Apr 20.
And explorers with a sole or partial focus on natural gas exploration survived yesterday’s rout.First Trust Natural Gas ETF (FCG - Free Report) advanced 4.1% on the day.The underlying ISE-Revere Natural Gas Index is an equal-weighted index comprising exchange-listed companies that derive a substantial portion of their revenues from the exploration and production of natural gas. The fund yields 5.80% annually (read: 5 Best Sector ETFs Halfway Through April).
Oil & Gas Services With Tanker Exposure
Oilfield service companies offer technologies and equipment to oil and natural gas drillers. Though oil price slump hurt the oilfield services companies too, the oilfield players have been under less pressure than explorers. Invesco Dynamic Oil & Gas Services ETF (PXJ - Free Report) gained 2.5% on Apr 20.
First of all, restructuring efforts and mixed earnings made the likes of Schlumberger and Halliburton better-positioned in latest trading sessions. The exposure to gas production is second positive.
But the real boost came in the form of a surge in tankers’ stocks. The demand for floating storage is escalating. DHT Holdings Inc. (DHT - Free Report) (up 7.5% on Apr 20) and Frontline Ltd. (FRO - Free Report) (up 12.7% on Apr 20) both have a respective of 8.17% and 7.09% exposure to PXJ.
MLPs
The underlying Alerian MLP Infrastructure Index comprises 22 energy infrastructure MLPs. Its constituents generally earn the majority of their cash flow from the transportation and storage of energy commodities. Due to its contributions toward storage, MLPS are not that hurt. MLPs earn profits from the quantity of oil and natural gas they are transporting.
Plus, MLPs are high-dividend in nature. Most MLPs were better-positioned on Apr 20. For instance, UBS ETRACS Alerian MLP Infrastructure Index ETN lost only 0.8%, way lesser than the commodity itself. MLPI yields 12.43% annually.
Refiners
Though refiners too are facing the storage issue, they can at least buy cheaper oil now. Crude is refiners’ input. Plus, once the lockdowns are lifted, demand for oil would again rise and refiners would be the first to gain (read: Optimism Back in Wall Street? ETFs Areas to Win the Most).
VanEck Vectors Oil Refiners ETF (CRAK - Free Report) lost 1.96% on Apr 20.The underlying MVIS Global Oil Refiners Index of CRAK is a rules-based, modified capitalization-weighted index and intends to give investors a means of tracking the overall performance of companies involved in crude oil refining. It yields 2.19% annually.
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4 Energy ETF Areas Better Positioned Amid Negative Oil
With demand sinking amid coronavirus-led lockdowns and supply overflowing, energy companies are now looking only for storage — something that global oil producers and refiners are running short of. The crisis aggravated on Apr 20 as the May contract for U.S. WTI crude oil, which expires on Tuesday, dropped below zero for the first time in history.
However, the contract recovered later and was priced $0.0100 at the time of writing, while the June contract for the commodity was trading at about $19 per barrel. WTI crude ETFUnited States Oil Fund, LP (USO - Free Report) and Brent ETF United States Brent Oil Fund, LP (BNO - Free Report) lost about 11% and 6.9% on Apr 20. Notably, the price of oil continued to decline even after OPEC and its allies agreed to the biggest-ever production cut (read: OPEC Output Deal Cut: Will It Help Oil & Energy ETFs?).
Along with the commodity oil, explorers’ ETFs lost heavily. Energy Select Sector SPDR Fund (XLE - Free Report) lost 3.1% on Apr 20. Against this backdrop, below we highlight a few energy ETF areas that gained/lost little in the latest oil market rout.
Natural Gas
Per some analysts, with the shutting-in of oil wells (due to low prices), producers will also lose on some associated natural gas production. Plus, forecast of inclement weather both on the east and west coast, has probably boosted demand for natural gas. iPath Series B Bloomberg Natural Gas Subindex Total ReturnSM ETN added 7.8% on Apr 20.
And explorers with a sole or partial focus on natural gas exploration survived yesterday’s rout.First Trust Natural Gas ETF (FCG - Free Report) advanced 4.1% on the day.The underlying ISE-Revere Natural Gas Index is an equal-weighted index comprising exchange-listed companies that derive a substantial portion of their revenues from the exploration and production of natural gas. The fund yields 5.80% annually (read: 5 Best Sector ETFs Halfway Through April).
Oil & Gas Services With Tanker Exposure
Oilfield service companies offer technologies and equipment to oil and natural gas drillers. Though oil price slump hurt the oilfield services companies too, the oilfield players have been under less pressure than explorers. Invesco Dynamic Oil & Gas Services ETF (PXJ - Free Report) gained 2.5% on Apr 20.
First of all, restructuring efforts and mixed earnings made the likes of Schlumberger and Halliburton better-positioned in latest trading sessions. The exposure to gas production is second positive.
But the real boost came in the form of a surge in tankers’ stocks. The demand for floating storage is escalating. DHT Holdings Inc. (DHT - Free Report) (up 7.5% on Apr 20) and Frontline Ltd. (FRO - Free Report) (up 12.7% on Apr 20) both have a respective of 8.17% and 7.09% exposure to PXJ.
MLPs
The underlying Alerian MLP Infrastructure Index comprises 22 energy infrastructure MLPs. Its constituents generally earn the majority of their cash flow from the transportation and storage of energy commodities. Due to its contributions toward storage, MLPS are not that hurt. MLPs earn profits from the quantity of oil and natural gas they are transporting.
Plus, MLPs are high-dividend in nature. Most MLPs were better-positioned on Apr 20. For instance, UBS ETRACS Alerian MLP Infrastructure Index ETN lost only 0.8%, way lesser than the commodity itself. MLPI yields 12.43% annually.
Refiners
Though refiners too are facing the storage issue, they can at least buy cheaper oil now. Crude is refiners’ input. Plus, once the lockdowns are lifted, demand for oil would again rise and refiners would be the first to gain (read: Optimism Back in Wall Street? ETFs Areas to Win the Most).
VanEck Vectors Oil Refiners ETF (CRAK - Free Report) lost 1.96% on Apr 20.The underlying MVIS Global Oil Refiners Index of CRAK is a rules-based, modified capitalization-weighted index and intends to give investors a means of tracking the overall performance of companies involved in crude oil refining. It yields 2.19% annually.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>