Energy ETFs Set To Soar As Oil Price Rises

Oil price jumped following political instability in the Middle East and North Africa that halted output and exports from key OPEC producers — Libya and Iraq. Crude oil futures climbed as much as 2% to $59.73 per barrel while Brent advanced as much as 1.8% to $66 per barrel.

The two large crude production bases in Libya have been shut down amid a military blockade, leading to supply disruption. A blockage of oil exports at Libya’s ports is expected to cut the country’s output by about 800,000 barrels a day. The National Oil Corporation warned that the stoppages could cut more than half of the nation’s crude output. It estimated that Libya’s production will be limited to about 72,000 barrels per day — the lowest level since August 2011 — once its storage tanks are full. Libya has been producing around 1.2 million barrels per day.

Meanwhile, Iraq temporarily stopped work in an oil field on Jan 19 and supply from a second production site is at risk as widespread unrest escalated in the OPEC’s second-biggest producer. The International Energy Agency said last week that supplies from Iraq are “potentially vulnerable” due to rising political risks in the country and the broader region.

Given this, we have highlighted five energy ETFs that could see some gains at least in the near term. However, these have a Zacks Rank #4 (Sell) or 5 (Strong Sell). Please note that our ranking system takes into account the asset class outlook, which was negative for energy and hence most of the ETFs in that space have a #4 or 5 Zacks Rank.

Energy Select Sector SPDR (XLE - Free Report)

This is the largest and most popular ETF in the energy space with AUM of $10.8 billion and average daily volume of more than 14.7 million shares per day. Expense ratio comes in at 0.13%. The fund follows the Energy Select Sector Index and holds 28 securities in its basket.

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

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Vintage Vixen 9 months ago Member's comment

No they aren’t because Natural Gas is practically free these days...