The energy sector gained momentum this week as an escalation in Middle East tensions stoked oil supply worries, lifting up the price. Oil is on track to register its strongest weekly increase in two years, with U.S. crude rising about 9% this week.Many ETFs in the energy space — Strive U.S. Energy ETF (DRLL – Free Report) , Energy Select Sector SPDR (XLE – Free Report) , Fidelity MSCI Energy Index ETF (FENY – Free Report) , Vanguard Energy ETF (VDE – Free Report) and iShares U.S. Energy ETF (IYE – Free Report) — rose about 4% each over the past week.Iran launched about 200 ballistic missiles targeting Israel on Oct. 1, leading to growing fears of retaliation from Israel. If the conflict worsens, oil prices could reach $100 per barrel. A potential Israeli attack on Iranian oil production or export facilities could cause a material disruption, potentially more than a million barrels per day. Iran is the seventh largest oil producer in the world, exporting around half its production abroad, mainly to China. If Israel carried out a major attack on Iran’s oil facilities, it could take 1.5 million barrels per day supply off the market, per an analyst at Citigroup.
Energy Outlook Remains Weak
The energy market is grappling with concerns over slowing demand and fears of a surplus next year. This is especially due to waning demand from China and the planned increase in output of 180,000 barrels a day (bpd) each month by the Organization of the Petroleum Exporting Countries (OPEC) plus allies such as Russia starting in December. Additionally, growing output from the United States, Guyana, Brazil and Canada will continue to take a toll on oil prices.Per the International Energy Agency (IEA), growth in the world demand for oil is expected to slow down in the coming years as energy transitions advance. At the same time, global oil production is set to ramp up, easing market strains and pushing spare capacity toward levels unseen outside of the COVID-19 crisis.Here, we have profiled the abovementioned ETFs:Strive U.S. Energy ETF (DRLL)Strive U.S. Energy ETF seeks broad market exposure to the U.S. energy sector and follows the Bloomberg US Energy Select Index. It holds 41 stocks in its basket, with a heavy concentration on the top two firms. Strive U.S. Energy ETF has gathered $307.6 million in its asset base. It charges 40 bps in fees per year from investors and trades in an average daily volume of 51,000 shares. DRLL has a Zacks ETF Rank #2 (Buy).Energy Select Sector SPDR (XLE)Energy Select Sector SPDR is the largest and the most popular ETF in the energy space, with AUM of $35.4 billion and an average daily volume of 14 million shares per day. It offers exposure to the broad energy space and follows the Energy Select Sector Index. Energy Select Sector SPDR holds 22 securities in its basket, with a heavy concentration on the top two firms. Energy Select Sector SPDR charges 9 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy).Fidelity MSCI Energy Index ETF (FENY)Fidelity MSCI Energy Index ETF fund follows the MSCI USA IMI Energy Index, holding 111 stocks in its basket with heavy concentration on the top two firms. Fidelity MSCI Energy Index ETF charges 8 bps in annual fees and trades in a good volume of around 747,000 shares. It has accumulated $1.6 billion in its asset base and has a Zacks ETF Rank #2.Vanguard Energy ETF (VDE)Vanguard Energy ETF provides exposure to a basket of 112 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. It has amassed $7.8 billion in its asset base. VDE sees a good volume of about 399,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #1.iShares U.S. Energy ETF (IYE)iShares U.S. Energy ETF tracks the Russell 1000 Energy RIC 22.5/45 Capped Gross Index (USD), giving investors exposure to U.S. companies that produce and distribute oil and gas. It holds 42 stocks in its basket, with heavy concentration on the top two firms. iShares U.S. Energy ETF charges 39 bps in fees per year from its investors. It has AUM of $1.2 billion and an average daily volume of about 265,000 shares. The product has a Zacks ETF Rank #1.More By This Author:Utility ETFs Scaling New Highs Amid Middle East Crisis
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