Best Oil ETFs to Watch in 2022

Jitanchandra Solanki
12 Min read

Oil prices have been on a rollercoaster ride in recent years, crashing to 30-year lows after the pandemic before rallying more than 500% into 2021 and even further at the beginning of 2022 due to rising energy prices.

It’s just one reason investors are keen to identify what the best oil ETFs (exchange traded funds) are for this year. 

These types of funds aim to track an index of oil prices by investing in oil directly or through derivatives like futures or options - allowing the investor to just focus on one investment to diversify their portfolio. 

Let’s take a look at some of the best oil ETFs to watch, how oil ETFs work and how to invest in them with competitive commissions.

Best Oil ETFs to Watch in 2022 List

Here is a quick-fire list of some of the best oil ETFs to watch this year. Of course, this list is not exhaustive but it does serve as a great starting point. 

  1. United States Oil Fund LP ETF - Best for WTI Crude Oil Exposure
  2. Lyxor STOXX Europe 600 Oil & Gas UCITS ETF - Best for European Oil & Gas Company Exposure
  3. iShares Oil & Gas Exploration & Production UCITS ETF - Best for US Oil & Gas Production Companies

More detailed analysis and research of these ETFs can be found further down this article.

How to Invest in Oil ETFs in 4 Steps

With Admirals, you can invest in oil ETFs and oil stocks through the Invest.MT5 account. Below is a step by step process on how to invest in oil ETFs in just 4 steps. This product allows you to trade gold both long and short meaning you can potentially profit from rising and falling gold bullion prices.  

  • Step 1: Open an account with Admirals to access the Trader’s Room.   
  • Step 2: Click on Trade on one of your live accounts to open the web platform.   
  • Step 3: Search for your oil ETF at the bottom of the Market Watch window and drag the symbol onto the chart.   
  • Step 4: Use the one-click trading feature, or right-click and open a trading ticket to input your trading price levels.  

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3 Best Oil ETFs: Research & Analysis

There are many different investment management companies that provide access to oil ETFs. There are Vanguard oil ETFs, iShares ETFs and many others. Let’s have a look at the top three to watch this year. 

1. United States Oil Fund LP ETF (USO)

The United States oil Fund is an exchange traded product whose shares trade on the New York Stock Exchange Arca. The aim of the fund is for the daily changes in percentage terms to reflect the daily changes in percentage terms of the light sweet crude oil spot price. 

The fund aims to be within plus/minus 10% of the average daily percentage change in the benchmark oil futures contract which is the near month futures contract of West Texas Intermediate Oil (WTI). In some cases, it could also be the subsequent month's futures contract. 

Source: Admirals MetaTrader 5, #USO, Weekly - Data range: from 15 Jul 2018 to 24 Mar 2022, performed on 24 Mar 2022 at 1:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

In the above long-term price chart of the United States Oil Fund ETF, it’s clear to see the long-term downtrend. The price has had some significant periods of consolidation during the downtrend but it has since rallied higher from the lows. While the price action stalled at the end of 2021, the beginning of 2022 saw the price surge higher. 

This was in line with a surge higher in broader energy prices due to supply constraints and risk-off flows from the Russia-Ukraine conflict. From a technical analysis perspective, the next major target for buyers will be the horizontal resistance line around $106.00. With geopolitical pressures on energy markets, many analysts have forecasted for the uptrend to stay intact for some time.

You can trade the United States Oil Fund ETF using CFDs (contracts for difference). This means you can trade both long and short and potentially profit from rising and falling prices.  

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2. Lyxor STOXX Europe 600 Oil & Gas UCITS ETF (OIL)

The Lyxor STOXX Europe 600 Oil & Gas UCITS ETF is a more diversified product that focuses on investments within the oil and gas industry. The aim of the fund is to track the benchmark index STOXX Europe 600 Oil & Gas which focuses on the largest stocks within the oil and gas industry in Europe. 

As of March 2022, the fund’s biggest holdings included 30.28% in Royal Dutch Shell, 15.1% in BP PLC, 14.73% in Total SA, 7.31% in Statoil ASA, 6.85% in ENI Spa and holdings in other oil, gas and renewable energy companies. 

Source: Admirals MetaTrader 5, OIL, Monthly - Data range: from 1 Nov 2006 to 24 Mar 2022, performed on 24 Mar 2022 at 1:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

In the long-term price chart above for the ETF, it is clear to see the consolidation that has developed between €48.51 and €24.59, as drawn on by the two black horizontal lines. These types of support and resistance lines can provide interesting zones for turning points in the market as is the very basis of technical analysis of charts. 

The surge higher in energy prices at the beginning of 2022 has helped lift the price of the ETF to the top of the trading range. This will now be a big test for the market. If the price can break through it is a conviction of buyers believing energy prices will be higher in the future and could start the beginning of a longer trend. 

You can make technical analysis much simpler by using the exclusive Premium Analytics tools from Admirals.

This includes FREE access to the Technical Insight Lookup indicator which provides actionable trading and investing ideas on thousands of different markets including oil ETFs. 

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3. iShares Oil & Gas Exploration & Production UCITS ETF (IOGP)

iShares by BlackRock is one of the world’s largest ETF providers. The iShares Oil & Gas Exploration & Production UCITS ETF is designed to track the performance of an index that is composed of the biggest global companies involved in the exploration of oil and gas production.

This fund provides investors with the opportunity to capitalise on the sector without trying to pick the best individual stock, thus providing a more diversified and broader exposure.  

Source: iShares, 24 March 2022. Past performance is not a guarantee of future performance.

As of 22 March 2022, the fund had 83 holdings in countries all over the world including the United States, Canada, Australia, Russia, Japan and elsewhere. Some of the fund’s top holdings included 10.17% in EOG Resources, 10.10% in Canadian Natural Resources Ltd, 10.04% in ConocoPhillips and many others. 

From a technical analysis perspective, the price of the ETF remains in an uptrend. In fact, the uptrend has been established since the beginning of 2021. The price further accelerated at the beginning of 2022 due to a rise in energy prices around the world from the Russia-Ukraine conflict. 

Source: Admirals MetaTrader 5, IOGP, Weekly - Data range: from 8 Jul 2018 to 24 Mar 2022, performed on 24 Mar 2022 at 1:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. Last five-year performance unavailable. 

If you want to get more in-depth information about oil ETFs, have a look at the video below where a professional trader discusses the recent bullish performance in oil and shines a light on different ETFs that could be of interest to traders.

How do Oil ETFs Work?

An oil ETF (exchange traded fund) acts in a similar way to a mutual fund. The investment company that creates the ETF would simply buy oil-related securities to track a benchmark oil index. 

The securities the fund management company invests in can vary from shares in an oil or gas-related company, or it could be buying oil directly or through derivatives such as futures and options. 

Investors can then trade on the price of an oil ETF like any other stock as they are also listed on the stock exchange. This provides investors with the ability to diversify their portfolio into commodity and energy markets.

Different Types of Oil ETFs

When trading ETFs in oil it is important to know the different types there are. 

This is especially important when it comes to risk management as some ETFs can amplify your returns and losses more than you may typically expect.  

A few unique ETFs that are important to know about include:

Leveraged Oil ETFs

A leveraged oil ETF amplifies the price swings of the benchmark oil index it is following. There are a variety of different types of leveraged oil ETFs too. There is the ETFS 2x Daily Long WTI Crude Oil ETF and the ProShares UltraPro 3x Crude Oil ETF. 

Let’s take the ETFS 2x Daily Long WTI Crude Oil ETF as an example. This instrument offers investors leveraged exposure to the total return of an investment in WTI (West Texas Intermediate) oil futures contracts. It does this by tracking the Bloomberg WTI Crude Oil Index. 

As the fund is 2x leveraged, it means the fund is designed to move 200% of the daily percentage change of the Bloomberg WTI Crude Oil Index. So, if the index moved 5% in a day, then the leveraged fund would move 10%. 

Of course, while this amplifies possible returns it also amplifies the losses as well so it may not be that suitable for beginner investors. As always, risk management is key to long-term, successful investing. 

Inverse Oil ETFs

Inverse oil ETFs allow investors to potentially profit from falling oil prices. This is because inverse oil ETFs move in the opposite direction (the inverse) of the benchmark oil index it is following. 

If oil prices were falling, then it is likely any benchmark oil index would also fall. In this instance, the inverse oil ETF would rise. Therefore, if an investor believed oil prices are likely to fall, they could buy an inverse oil ETF and potentially profit as oil prices fall.

Are Oil ETFs a Good Investment?

Deciding whether or not oil ETFs are a good investment in your investing portfolio ultimately depends on several factors including what the market is doing, your tolerance to risk and your overall knowledge and experience.

Oil prices are notoriously volatile as they are affected by a variety of different factors beyond just supply and demand. It is a politicised commodity and often finds itself at the mercy of geopolitical tensions. This volatility may not suit all types of investors as everyone has a different risk tolerance level.

Of course, educating yourself on the fundamental analysis and technical analysis of oil is important to help identify directional biases in the commodity. Fortunately, when you open a demo or live trading account with Admirals you have access to a ton of educational resources to learn!

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Why Invest in Oil ETFs with Admirals?

You can invest in all of these oil ETFs from the Admirals Invest.MT5 account. With this account, you can:

  • Access FREE real-time data
  • Receive FREE market news from Dow Jones Newswires
  • Invest in stocks and ETFs from 15 of the largest exchanges in the world
  • Create a passive income stream with dividend stocks
  • Enjoy ZERO monthly maintenance fees
  • Invest from just $0.02 per share on US stocks
  • Enjoy low minimum transaction fees of just $1!

Furthermore, you can open an account and use all of these features for yourself with just €1! Click the banner below to get started today…

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About Admirals 

Admirals is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!

INFORMATION ABOUT ANALYTICAL MATERIALS:

The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the website of Admirals. Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admirals AS (Admirals) shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
  3. With a view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for the prevention and management of conflicts of interest.
  4. The Analysis is prepared by an independent analyst (Jitan Solanki, Market Analyst, hereinafter “Author”) based on personal estimations.
  5. Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis.
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