Top Energy ETFs Since Oil Bottomed

April 06, 2016

Volatility in the oil market just won't let up. After reaching a low of around $26 a barrel on Jan. 20, U.S. crude oil prices rallied as high as $42 on March 22. Now, they're back on the downswing, hitting a one-month low of $35.24 today.

Likewise, many energy stocks are also selling off after surging in March.

Yet despite the latest setbacks, many experts believe the worst is behind us when it comes to oil prices. In a recent interview with ETF.com, Jim Rogers said that oil was in the process of forming a bottom.

If that's the case, perhaps this latest pullback in the energy sector is a buying opportunity for those who missed the first bottom in January.

For investors looking to get exposure to the space, there are ETFs―but which one is the best bet?

From futures-based funds that track oil itself to equity-based funds that track producers—like Exxon and Chevron—there's a number of ways to trade or invest in oil.

Here are the five top-performing, nonleveraged energy ETFs since the oil market bottom on Jan. 20:

Guggenheim Canadian Energy Income ETF (ENY) +30.8%

The Guggenheim Canadian Energy Income ETF (ENY | C-80) edged into the No. 1 position on the list. This fund exclusively holds Canadian energy companies, including oil sands operators and royalty trusts.

As high-cost operators, oil sands were some of the most-beaten-down energy stocks during the past few years. If oil prices recover, they'll certainly feel some relief. The breakeven price for these types of operations is $35-40, according to a report from TD Securities.

Gains in the Canadian dollar against the U.S. dollar also had a positive impact on ENY. Since the oil market lows, the Canadian currency gained 9.2% against its U.S. counterpart.

ENY has an expense ratio of 0.71%.

InfraCap MLP ETF (AMZA) +29.2%

An actively managed fund that invests in midstream MLPs, the InfraCap MLP ETF (AMZA) is the top-performing ETF in the MLP space since the oil market bottom. After attracting many investors with their large distributions, the collapse in MLPs during 2015 came as a shock.

These companies, which primarily operate energy infrastructure such as pipelines and storage facilities, were thought to be immune to declines in oil prices. However, the unprecedented rout in crude dashed those assumptions, and now with U.S. crude oil output falling, the outlook for MLPs is still uncertain.

AMZA significantly underperformed other indexed MLP funds in 2015, such as the Alerian MLP ETF (AMLP). However, that riskier portfolio led to outperformance in the period since the oil market bottom earlier this year.

The expense ratio for AMZA is 1.11%.

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].

Find your next ETF

Reset All