Top Energy ETFs Since Oil Bottomed

April 06, 2016

Market Vectors Unconventional Oil & Gas ETF (FRAK) +27.9%

Launched during the heyday of the shale revolution in the U.S.―when production was booming, yet oil prices were still high―the Market Vectors Unconventional Oil & Gas ETF (FRAK | B-26) had 2 1/2 great years of performance.

Then, like all other energy ETFs, FRAK performed abysmally from mid-2014 until the oil market bottom this January.

OPEC's efforts to punish U.S. shale producers and get them to slow their drilling ultimately worked and took a toll on FRAK.

Nevertheless, FRAK's underlying portfolio is chock-full of large shale oil producers with enormously high-quality reserves in the ground, such as EOG Resources and Pioneer Natural Resources. If oil prices end the year higher, there's a good chance FRAK will remain one of the top performers among energy ETFs.

The fund has an expense ratio of 0.54%.

IQ Global Oil Small Cap ETF (IOIL) +27.7%

Small-cap stocks tend to be more volatile than their large-cap counterparts; thus, it's no surprise to see the IQ Global Oil Small Cap ETF (IOIL | D-32) outperform now that oil prices are up from their lows.

IOIL's small-cap tilt gives it a primary focus on independent exploration and production companies and refining companies rather than the integrated giants that dominate the market-cap-weighted Energy Select SPDR (XLE | A-91). For comparison, XLE is up 17.1% in the time period referenced.

The expense ratio for IOIL is 0.76%.

United States Brent Oil Fund (BNO) +26.8%

The only futures-based fund to crack the top five, the United States Brent Oil Fund (BNO) handily outperformed the other oil-tracking ETFs.

The United States Oil Fund (USO | B-100), which tracks U.S. West Texas Intermediate futures, rose by only 11.1% in the same period, illustrating that benchmark selection is critical when it comes to these products.

The contango in the Brent futures curve is much less pronounced than in the WTI futures curve, which aided BNO's returns. With storage capacity at Cushing, Oklahoma―the delivery point for WTI futures―quickly filling up, USO may continue to lag its European counterpart.

The expense ratio for BNO is 0.94%.

Contact Sumit Roy at [email protected].

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