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Best Oil ETFs for Q4 2021

Oil exchange-traded funds (ETFs) offer direct access to the oil market by tracking the price of oil as a commodity. This approach is different from investing in funds that own a portfolio of oil stocks. There is potential for significant returns through investing in the oil sector, but risks remain high amid the COVID-19 pandemic and the resulting massive disruption of economies worldwide. Oil prices historically have been prone to quick, dramatic swings up and down. Oil ETFs provide investors a straightforward way to gain exposure to those price swings without having to buy and store the physical commodity or navigate the complexities of investing in oil futures contracts.

Key Takeaways

  • Oil prices have dramatically outperformed the broader stock market over the past year.
  • The ETFs with the best 1-year trailing total return are OIL, OILK, and BNO.
  • The top holdings of the first two ETFs are futures contracts for Sweet Light Crude Oil (WTI), and the top holdings of the third are futures contracts for Brent Crude Oil.

There are currently 6 distinct oil commodity ETFs that trade in the U.S., excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). Oil prices have climbed by 137.2% over the past twelve months, significantly outperforming the S&P 500’s total return of 48.7%, as of May 14, 2021. The best-performing oil ETF, based on performance over the past year, is the iPath Pure Beta Crude Oil ETN (OIL). We examine the top 3 oil ETFs below. These ETFs focus on oil as a commodity rather than oil company stocks. All numbers below are as of May 17, 2021.

  • Performance over 1-Year: 114.5%
  • Expense Ratio: 0.75%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 32,369
  • Assets Under Management: $55.0 million
  • Inception Date: April 20, 2011
  • Issuer: Barclays Capital

OIL provides exposure to the Barclays WTI Crude Oil Pure Beta TR Index, which aims to reflect potential returns of futures contracts in the crude oil markets. The fund is structured as an exchange-traded note (ETN), a type of unsecured debt security that is similar to a bond, but trades on an exchange like a stock. The ETF’s underlying index may utilize futures contracts of varying expiration dates. The holdings of OIL are futures contracts of Sweet Light Crude Oil (WTI).

  • Performance over 1-Year: 113.9%
  • Expense Ratio: 0.68%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 28,559
  • Assets Under Management: $83.3 million
  • Inception Date: Sept. 26, 2016
  • Issuer: ProShares

OILK targets the Bloomberg Commodity Balanced WTI Crude Oil Index. Unlike some other oil ETFs, OILK does not aim to track the performance of the spot price of WTI crude oil, and indeed may perform very differently. Rather, like the target index, OILK aims to track the performance of three separate contract schedules for WTI crude oil futures. The fund’s holdings are futures contracts of Sweet Light Crude Oil (WTI).

  • Performance over 1-Year: 105.0%
  • Expense Ratio: 1.13%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 1,142,773
  • Assets Under Management: $324.3 million
  • Inception Date: June 2, 2010
  • Issuer: Concierge Technologies

BNO, a futures-based commodity pool, does not track West Texas Intermediate (WTI), like the two funds above. Rather, BNO tracks the spot price of Brent Crude Oil, the crude oil benchmark for the EMEA region. Because Brent often trades at a different price from WTI, BNO can be a useful way of gaining alternative exposure. The holdings of BNO are futures contracts for Brent Crude Oil.

The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.