Eenergy stocks are poised to have their best year in more than three decades, according to a CNBC article. The group is still up more than 47% over the year. The S&P 500 is up almost 28% this year. Crude prices have risen about 60% this year as the outlook for demand continues to improve as the economy reopens.
First Trust Natural Gas ETF FCG, Invesco Dynamic Energy Exploration and Production ETF PXE, Invesco DWA Energy Momentum ETF PXI, IShares US Oil & Gas Exploration & Production ETF IEO and ETF SPDR S&P Exploration and production of oil and gas XOP has gained over 70% this year.
What is behind the rally?
The coronavirus vaccination and boosters are gradually helping to control the spread and severity of the outbreak across the world, which bodes well for the energy sector. The rise in oil prices has come this year despite increasing cases of the virus in India – one of the major consumers of oil.
In mid-2021, the CNBC article noted that the good start to the energy year signaled that while the industry is not going anywhere for the remainder of 2021, it will still be the best year since 1990 by nearly 10%, according to Bay Crest Partners. Chief Market Technician Jonathan Krinsky.
The forecast proved to be correct, as energy led all sectors, with only information technology making it fiercely competitive. SPDR Technology Select Sector Fund XLK is up 44% this year. Crude oil prices hit a seven-year high in early October due to energy supply issues and persistent declines in oil inventories.
Although energy stocks weakened in the fourth quarter due to the outbreak of the highly infectious Omicron strain of COVID-19, the industry has remained afloat. News that Omicron is less fatal than the Delta version has assured investors that there will not be a strict and prolonged global lockdown in the coming days. ETF Energy XLE only gained 6% in the fourth quarter.
In addition to easing concerns about the impact of the Omicron variant on global fuel demand, the fact that Iranian nuclear talks run into a problem, delaying the return of Iranian crude supplies, has driven up prices. oil prices lately.
More potential in the first quarter of 2022?
Global oil demand is expected to return to pre-pandemic levels by the end of 2022, increasing 5.5 mb / d in 2021 and a further 3.3 mb / d next year. From September to the end of 2021, global production is expected to increase by 2.7 mb / d, with OPEC + accounting for 1.5 mb / d and non-OPEC + contributing the rest, according to the International Energy Agency (IEA) .
Continuing, the Organization of the Petroleum Exporting Countries and its production allies, collectively known as OPEC +, added to the optimism in demand for oil. He expects demand to increase with the global economic recovery.
In a monthly report, OPEC said in mid-December that it expects global oil demand to average 99.13 million barrels per day in the first quarter of 2022, up $ 1. 11 million bpd compared to its forecast last month. “Part of the recovery previously expected in Q4 2021 has been postponed to Q1 2022, followed by a more stable recovery throughout the second half of 2022,” OPEC said in the report, as reported by Reuters .
Against this background, we present below some of the best performing energy ETFs / ETNs of this year.
Focus on ETFs
First Trust Natural Gas ETF (FCG) – Up 105.3%
The underlying ISE-Revere Natural Gas Index is an equally weighted index composed of publicly traded companies that derive a substantial portion of their income from the exploration and production of natural gas. FCG charges 60 basis points for fees.
Invesco Dynamic Energy Exploration & Production (PXE) ETF – Up 99.3%
The underlying Dynamic Energy Exploration & Production Intellidex index is made up of stocks of 30 US companies involved in the exploration and production of natural resources used to produce energy. The PXE ETF charges a 63 bps fee.
Invesco DWA Energy Momentum ETF (PXI) – Up 81.3%
The underlying Dorsey Wright Energy Technical Leaders index identifies companies that display relative strength and are made up of at least 30 common stocks from a universe of approximately 3,000 common stocks traded on US stock exchanges. ETF PXE charges 60 basis points of fees.
IShares US Oil & Gas Exploration & Production (IEO) ETF – up 78.8%
The underlying Dow Jones US Select Oil Exploration & Production Index is a free float-adjusted market capitalization weighted index. The index includes companies engaged in the exploration and extraction, production, refining and supply of oil and gas products. ETF IEO charges 42 basis points for fees.
SPDR S&P Oil & Gas Exploration & Production ETF (XOP) – Up 72.7%
The underlying S&P Oil & Gas Exploration & Production Select Industry index represents the oil and gas exploration and production sub-industry of the S&P Total Markets Index. ETF XOP charges 35 basis points of fees.
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Energy Select Sector SPDR ETF (XLE): ETF Research Reports
Technology Select Sector SPDR ETF (XLK): ETF Research Reports
IShares US Oil & Gas Exploration & Production (IEO) ETF: ETF Research Reports
SPDR S&P Oil and Gas Exploration and Production (XOP) ETF: ETF Research Reports
First Trust Natural Gas ETFs (FCGs): ETF Research Reports
Invesco DWA Energy Momentum ETFs (PXI): ETF Research Reports
Invesco Dynamic Energy Exploration and Production ETF (PXE): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.