Top 10 Oil and Gas ETFs Offering the Highest Investment Returns

Top 10 Best ETF Investment: Largest Oil and Gas for 3X Returns

 The oil and gas ETF or Exchange-traded funds invest in companies working in the oil and gas industries. The primary focus of the oil and gas industries is exploration, production, refining, marketing, and distribution. 

  • Oil and gas ETFs provide investors with exposure to the energy sector without purchasing the individual stocks of the company. 

  • About 30 oil and gas stock ETFs are traded in the United States.

1- Invesco Dynamic Energy Exploration &Production ETF(PXE)

The fund tracks the energy exploration and production companies of the U.S. It follows a complex weighting methodology. It is one of the three popular indexes that tracks the oil and gas drilling sector.

  • Inception date- October 26, 2005

  • Assets Under Management- $174.96 million

  • Expense ratio- 0.63%

2- The Energy Select Sector SPDR Fund (XLE)

The index provides exposure to companies engaged in oil, gas, and consumable fuel, energy equipment, and service industries. It mimics the energy sector of the S&P 500 Index. 

  • Inception date- December 16, 1998

  • Assets Under Management- $39,430.49 million

  • Expense ratio- 0.10%

3- iShares U.S. Oil and Gas Exploration & Production ETF (IEO)

It provides exposure to U.S. companies engaging in oil and gas exploration, production, as well as distribution. It focuses on tracking the investment results of an index composed of U.S. equities in the oil and gas production sector.

  • Inception date- May 1, 2006

  • Assets Under Management- $ 1.3 billion

  • Expense ratio- 0.40%

4- United States Gasoline (UGA)

It is the first ETP in the gasoline commodity space. It holds near-month NYMEX futures contracts on reformulated gasoline blendstock for oxygen blending gasoline. 

  • Inception date- February 26, 2008

  • Assets Under Management- $63.87 million

  • Expense ratio- 0.97%

5- United States Oil Fund (USO)

It is an exchange-traded fund that tracks the West Texas Intermediate Light Sweet Crude Oil price. It is the largest fund that offers exposure to oil, one of the world's most important commodities, which may be attractive as an inflation hedge.

  • Inception date- October 4, 2006

  • Assets Under Management- $1.53 billion

  • Expense ratio-0.81%

6- VanEck Oil Services (OIH)

VanEck Oil Services tracks a market-cap-weighted index of 25 of the largest US-listed, publicly traded oil services companies. Its simple strategy captures and tracks the 25 most significant and liquid US-listed services companies. It also focuses on a few overseas companies. 

  • Inception date- December 20, 2011

  • Assets Under Management- $2.54 billion

  • Expense ratio- 0.35%

7- Invesco DB Oil Fund (DBO)

It tracks an index of crude oil future contracts. It has a next-generation future strategy that provides access to WTI. It minimizes the impact of a rising price curve by selecting the most attractive future contracts. 

  • Inception date- January 5, 2007

  • Assets Under Management- $279.72 million

  • Expense ratio- 0.76%

8- Global x MLP (MLPA)

It is an exchange-traded fund that tracks a market-cap-weighted index comprising US-listed midstream Master Limited Partnerships. These MLPs focus on commodities, generally transporting, storing, and processing various energy sources. The weight of the security in the fund's portfolio is determined by its market capitalization.

  • Inception date- April 18, 2012

  • Assets Under Management- $1.42 billion

  • Expense ratio- 0.45%

9- Alerian MLP (AMLP)

It is an ETF that tracks a market-cap-weighted index of publicly traded energy infrastructure MLPs in the U.S. It is a C-corporation that allocates its portfolio to MLPs. These MLPs focus on the commodities engaged in midstream activities like transportation and storage. 

  • Inception date- June 1, 2006

  • Assets Under Management- $7.15 billion

  • Expense ratio- 0.87%

10- Fidelity MSCI Energy (FENY)

It tracks the market-cap-weighted index of U.S. energy companies. The index includes those companies considered by MSCI and captures 98% of the U.S. energy market. It has a concentrated portfolio, and despite this concentration, it provides exposure to various oil and gas industries. It also includes those companies engaged in coal and renewable energy.

  • Inception date- October 21, 2013

  • Assets Under Management- $1.67billion

  • Expense ratio- 0.08%

Best Way to Invest in Oil and Natural Gas ETFs

There might be questions regarding such investment, especially when the world is transitioning towards renewable energy. Although Natural gas is a fossil fuel, unlike oil and coal, it's a cleaner burning energy source. It emits less pollution than oil and coal, so the future looks safe. 

There are only two U.S. natural gas ETFs: The United States 12 Months Natural Gas Fund LP, the largest natural gas ETF with $1.11 billion of assets, and the United States Natural Gas Fund. 

The process of investing in ETFs is the same as investing in stocks.

1- Brokerage Account:

It is necessary to have a brokerage. Before opening a brokerage account, look for the fees, minimum deposits, type of assets, customer services, etc. 

2- Investment Strategy:

You might be interested in diversifying your portfolio. Before investing, ensure your risk appetite, financial goals, etc. 

3- Research the Natural Gas ETFs:

It is essential because the more you research, the more you know about the ETFs that can provide maximum returns on your investment. You will also learn about the companies these ETFs are investing in.

4- Buy the ETFs:

If you do not rely on a robo-advisor and like to do it on your own,

  • Fund the Account: Transfer the cash into your brokerage account to buy the ETF shares.

  • Search for the Ticker Symbol: Search for the ETF you want to invest in.

  • Enter the Number of Shares: You can't buy a fraction of shares. Keep your risk tolerance in mind before adding the shares. 

  • Confirm the Order:  Choose what price you want to invest: market price or any specific price.

5- Purchase Plan:

Investing in ETFs is a regular job, and to reach your goals, you will need to do them at a specific time. Many brokers allow you to set a purchase plan. Check your portfolio once in six or 12 months. 

6- Exit strategy:

You must have an exit strategy, as it will determine your capital gains taxes and how much you save on them. 

Top Two Natural Gas ETFs

United States 12 Month Natural Gas Fund LP

It is an Exchange-traded fund that tracks the price movement of Natural gas.

  • Inception date- November 18, 2009

  • Assets Under Management- $251.17million 

  • Expense ratio- 0.90%

United States Natural Gas Fund LP

It provides exposure to front-month natural gas futures, rolling expiring front-month contracts to the next-nearest month. 

  • Inception date- April 18, 2007

  • Assets Under Management- $1.05 billion

  • Expense ratio-1.11%

Are Oil and Gas ETFs a good investment?

The oil and gas industry is quite challenging for investors to invest. Oil prices are highly volatile and mainly depend on the Geo-political event due to its worldwide supply and demand. 

The industry is capital-intensive in nature, which implies that it involves huge costs in drilling and maintaining the well to increase production. This is challenging in times of falling prices of oil and gas. 

Despite the challenges faced by the industry, the worldwide demand makes it a good option once the other substitutes are formulated. According to the International Energy Agency, oil and gas demand will continuously rise until 2040.

Final Word

When the economy struggled to rise during the Russia-Ukraine crisis, the energy sector outperformed. The industry could be risky for some investors, but it is still a good option for many. The growing demand for energy makes the sector a good choice for those investors who like to bet on risky assets. 

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29 Nov, 2023

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