5 Best ETFs & Stocks Of The Top Performing Energy Sector

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The energy sector has been the top performer this year buoyed by higher oil prices. U.S. oil price climbed to their highest since 2014 amid global supply concerns in crude, natural gas and coal markets.

Investors should note that the global supply has been disrupted by hurricane outages and low investment. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, stuck to their planned output increase by 400,000 barrels per day in November rather than boosting it further.

Added to the oil price strength is growing fuel demand. Overall demand for fuel has rebounded to pre-pandemic levels. With new vaccination mandates to control the rising Delta variant of COVID-19, demand is poised to increase. Additionally, the energy crunch has sent natural gas prices skyrocketing, prompting power producers to switch to oil derivatives from gas to generate electricity.

According to Saudi Aramco CEO, global oil demand is "very healthy" and will reach close to 99 million barrels per day by the end of this year from 97 million barrels per day in Q3, with some natural gas customers switching to liquids. OPEC expects oil demand to grow sharply in the next few years as economies recover from the pandemic. The organization added that the world needs to keep investing in production to avert a crunch despite an energy transition.

Given tightening supply and growing demand, many analysts believe crude prices is poised to rally toward $100 a barrel. Last month, Bank of America Corp. estimated crude prices to move toward $100 at some point early next year and Goldman Sachs Group (GS) raised the Brent oil forecast to $90 per barrel from $80 per barrel by the end of the year, citing a faster-than-anticipated recovery in global demand.

As such, we have highlighted five ETFs & stocks that were at the forefront of the energy sector rally so far this year. These seem excellent choices to play the trend at least in the near term given that these have a solid Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 (Hold).

First Trust ISE-Revere Natural Gas Index Fund (FCG - Free Report)

It offers exposure to U.S. companies involved in the exploration and production of natural gas. The fund follows the ISE-Revere Natural Gas Index.

Zacks Rank: #2
AUM: $400.3 million

Expense Ratio: 0.60%
YTD Return: 107.4%

Invesco Dynamic Energy Exploration & Production ETF (PXE - Free Report)

This product follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value.

Zacks Rank: #3
AUM: $102.7 million
Expense Ratio: 0.63%
YTD Return: 100.5%

Invesco DWA Energy Momentum ETF (PXI - Free Report)

This fund offers exposure to companies having relative strength (momentum) by tracking the Dorsey Wright Energy Technical Leaders Index.
 
Zacks Rank: #3
AUM: $74.8 million
Expense Ratio: 0.60%
YTD Return: 88.8%

Invesco S&P SmallCap Energy ETF (PSCE - Free Report)

This fund offers exposure to the companies that are principally engaged in the business of producing, distributing or servicing energy-related products, including oil and gas exploration and production, refining, oil services, and pipelines. It tracks the S&P Small Cap 600 Capped Energy Index.

Zacks Rank: #3
AUM: $126.4 million
Expense Ratio: 0.29%
YTD Return: 85.3%

S&P Oil & Gas Exploration & Production ETF (XOP - Free Report)

This fund targets the oil and gas exploration and production corner of the broad energy space and follows the S&P Oil & Gas Exploration & Production Select Industry Index.

Zacks Rank: #3
AUM: $4.2 billion
Expense Ratio: 0.35%
YTD Return: 77.1%

SilverBow Resources Inc. (SBOW - Free Report)

It is engaged in the exploration, development, and production of oil and natural gas properties.

Zacks Rank: #1
VGM Score: B
Market Cap: $376.9 million
YTD Return: 456.3%

Ring Energy Inc. (REI - Free Report)

This company is engaged in the exploration and development of oil and gas.

Zacks Rank: #2
VGM Score: C
Market Cap: $359.6 million
YTD Return: 448.6%

SM Energy Company (SM - Free Report)

This independent oil and gas company is engaged in the exploration, exploitation, development, acquisition and production of natural gas and crude oil in North America.

Zacks Rank: #3
VGM Score: A
Market Cap: $3.6 billion
YTD Return: 381.4%

Centennial Resource Development Inc. (CDEV - Free Report)

This independent oil and gas exploration and production company primarily develops unconventional hydrocarbon reserves in the Delaware Basin, a part of the prolific Permian Basin.

Zacks Rank: #3
VGM Score: C
Market Cap: $2 billion
YTD Return: 378.7%

Laredo Petroleum Inc. (LPI - Free Report)

It is engaged in the exploration, development, and acquisition of oil and natural gas properties in the Permian and Mid-Continent regions of the United States.

Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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