Oil Investing In 2024: 4 ETFs To Consider For Backing Or Hedging Prices
Portfolio Pulse from Neil Dennis
Despite geopolitical tensions, crude oil prices have seen a decline over the year, with Brent down 9.7% and Nymex WTI down 10.4%. The United States Oil Fund (USO) followed a similar pattern. Oil majors like ExxonMobil (XOM), Chevron (CVX), and BP (BP) have seen their shares fall but are still investing heavily in oil, indicating a belief in its long-term value. The Energy Select Sector SPDR Fund (XLE) also declined. In contrast, the SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX) outperformed the SPDR S&P 500 (SPY), and the iShares Russell 2000 ETF (IWM) saw a significant gain.
December 29, 2023 | 2:19 pm
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POSITIVE IMPACT
The iShares Russell 2000 ETF saw a 17% gain in 2023, benefiting from a lower interest rate outlook and minimal exposure to oil prices.
IWM's significant gain is likely due to its small-cap focus and minimal exposure to the oil sector, which could continue to be advantageous if oil prices remain volatile.
CONFIDENCE 80
IMPORTANCE 75
RELEVANCE 70
POSITIVE IMPACT
SPYX, excluding companies with fossil fuel reserves, outperformed its sibling SPY, suggesting a shift in investor preference towards greener investments.
SPYX's outperformance compared to SPY reflects a positive investor sentiment towards greener investment options, which could continue to drive its price up in the short term.
CONFIDENCE 80
IMPORTANCE 80
RELEVANCE 75
NEGATIVE IMPACT
BP's shares decreased by 2% over the year, less than its peers, but still affected by the overall negative trend in oil prices.
BP's stock performance is slightly better than its peers, but the overall negative sentiment in the oil market is likely to continue affecting its stock price in the short term.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
NEGATIVE IMPACT
Chevron's stock is down 16.% over the year, tracking the downturn in oil prices, despite significant merger investments.
Chevron's stock decline is in line with the decrease in oil prices, and while the company is investing heavily in oil, this has not yet translated into stock price recovery.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 80
NEGATIVE IMPACT
USO, which tracks U.S. light-sweet crude, experienced similar volatility to crude prices, with a temporary spike but an overall decline.
USO's direct correlation with crude oil prices suggests that its short-term impact will likely follow the downward trend in oil prices.
CONFIDENCE 85
IMPORTANCE 80
RELEVANCE 90
NEGATIVE IMPACT
The Energy Select Sector SPDR Fund, which tracks oil majors, fell by 4% in 2023, reflecting the downturn in the oil market.
XLE's performance is closely tied to the oil majors it tracks, and as their stock prices have fallen, XLE has similarly declined.
CONFIDENCE 85
IMPORTANCE 75
RELEVANCE 85
NEGATIVE IMPACT
ExxonMobil's shares fell by 9.2% over the year, reflecting the decline in oil prices, despite the company's large-scale investments in mergers.
The decline in ExxonMobil's stock price is consistent with the overall trend in oil prices, and the company's investment in mergers shows a commitment to oil that may not immediately impact the stock price.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 80