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After a consecutive two-year annual decline, oil prices regained momentum to start 2025. Brent topped $81 per barrel following additional sanctions on Russia’s oil sector, which has threatened oil supplies. U.S. crude is trading above $78 per barrel. Both Brent and U.S. crude have risen more than 6% since Jan. 8, when the U.S. Treasury imposed wider sanctions on Russian oil.

Investors seeking to tap the oil rally could bet on the ETFs that are directly linked to the futures contracts. United States Oil Fund (USO - Free Report) , United States Brent Oil Fund (BNO - Free Report) , Invesco DB Oil Fund (DBO - Free Report) , Invesco DB Energy Fund (DBE - Free Report) and United States 12 Month Oil Fund (USL - Free Report) are popular oil ETFs that could be interesting plays to directly deal with in the futures market in the coming months.

The United States imposed its most aggressive and ambitious sanctions on Russia’s oil industry on Friday, targeting two large exporters — Gazprom Neft and Surgutneftegas — and 183 vessels. The move, aimed at curbing the revenues that Moscow uses to fund its war in Ukraine, will disrupt Russian crude supplies to major importers — China and India. This will push the two top buyers to source more oil from the Middle East, Africa and the Americas, thereby boosting oil prices.

Additionally, colder weather, falling U.S. stockpiles and speculation that Trump officials may tighten sanctions against Iran in the coming months are adding to the strength. Many U.S. states and European cities are experiencing extreme weather, raising concerns about potential disruptions to oil production and refinery operations. The cold snap also raised demand for heating oil. Per the latest Energy Information Administration report, domestic commercial crude supplies declined by 1 million barrels for the week ended Jan. 3. This marked the seventh consecutive week of declines in crude stockpiles. Notably, U.S. crude stocks at the Cushing, Oklahoma hub dropped to a 10-year low.

Further, the oil price surge is supported by President Joe Biden's announcement that he is moving to ban new offshore oil and gas drilling along most U.S. coastlines.

The bullishness in the oil market has pushed Brent and WTI monthly spreads to their widest backwardation since the third quarter of 2024. This signals that the oil market is tightening and demand is robust. A market in backwardation is likely to persist, at least in the near term, acting as the biggest catalyst for the oil.

ETFs in Focus

United States Oil Fund (USO)  

United States Oil Fund is the most popular ETF in the oil space, with an AUM of $1 billion and an average daily volume of 2.3 million shares. It seeks an average daily percentage change in USO’s net asset value for any period of 30 successive valuation days within plus/minus 10% of the average daily percentage change in the price of the Benchmark Oil Futures Contract over the same period. United States Oil Fund has an expense ratio of 0.70% and has gained 6.7% in the initial weeks of this year.

United States Brent Oil Fund (BNO)

United States Brent Oil Fund provides direct exposure to the spot price of Brent crude oil, as measured by the daily changes in the price of BNO’s Benchmark Oil Futures Contract. The Contract is the futures contract on Brent crude oil as traded on the ICE Futures Exchange that is the near month contract to expire. If the near-month contract is within two weeks of expiration, the Benchmark will be the next month's contract to expire. United States Brent Oil Fund has amassed $112.1 million in its asset base and charges 94% as annual fees and expenses. Volume is good as it exchanges 384,000 shares a day on average. BNO gained 7.6% in the initial weeks of this year.

Invesco DB Oil Fund (DBO)

Invesco DB Oil Fund provides exposure to crude oil through WTI futures contracts and follows the DBIQ Optimum Yield Crude Oil Index Excess Return. The Index is a rules-based index composed of futures contracts on WTI. Invesco DB Oil Fund has an AUM of $216.9 million and charges 76 bps of annual fees. DBO trades in an average daily volume of 283,000 shares and has risen 6.2% in the initial weeks of this year. 

Invesco DB Energy Fund (DBE)

Invesco DB Energy seeks to track changes in the level of the DBIQ Optimum Yield Energy Index Excess Return plus the interest income. The benchmark is a rules-based index composed of futures contracts on some of the most heavily traded energy commodities in the world — light sweet crude oil (WTI), heating oil, Brent crude oil, RBOB gasoline and natural gas. Invesco DB Energy has AUM of $48.3 million and trades in an average daily volume of 17,000 shares. It charges 77 bps in annual fees and has gained 6%.

United States 12 Month Oil Fund (USL)  

United States 12 Month Oil Fund provides investors with exposure to the daily price movements of West Texas Intermediate’s light, sweet crude oil. USL's benchmark is the near-month futures contract to expire and the contracts for the following 11 months for a total of 12 consecutive months. If the near-month futures contract is within two weeks of expiration, the benchmark will be the next-month contract to expire and the contracts for the following 11 months. United States 12 Month Oil Fund is unpopular and less liquid, with an AUM of $50.8 million and an expense ratio of 0.79%. USL trades in an average daily volume of 8,000 shares.

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