WATCH THE YOUTUBE VIDEO BELOW!!
The Recent global crisis has caused a mass number of travel restrictions to be implemented & lockdown of the entire planet.
Thus, demand for oil has dropped and thus the price of oil has PLUMMETED!
The price of Oil even wen’t negative which caused some people to panic & other people to even think they could get paid to have their cars filled up!!! (Grahma Stephan style – tone)
Of course this was not the course this was not the case.
Why did oil prices go negative?
The oil prices only wen’t negative due to expired Futures contracts. As previously before the global lockdown. Investors would purchase oil commodity stocks at a pre defined future price & then make money if it was higher.
However, in this environment these type of contracts just aren’t feasible.
HOW can you take advantage of this opportunity?
Well if you believe that the lockdown will eventually be lifted and the economy will recover from this recession as it has done so many times previously. (Pexels video traffic)
Then now could be a great time to invest in oil.
So in this video I’m going to talk you through my top 3 oil Energy ETF Funds.
Which offers you direct exposure to the oil industry. I’m also going to explain how I’ve invested during this oil crisis!!
WHAT determines the price of oil?
The price of oil is determined by three major factors, SUPPLY, DEMAND and COST to Drill.
With the Demand at an all time low & excessive oil supply the price has plummeted.
This is also not been helped United States which has risen RECENTLY TO become the NUMBER ONE oil–producing country in the world,
producing nearly 18 million barrels per day!!
Then of course you have Russia and Saudi Arabia to add into the mix who decided to have a “Who could go cheaper?” price war which didn’t help the oil prices at all!
Then of course you have the “Cost to drill” which varies massively between projects & countries with the US having some of the highest drilling costs & the Saudi Arabia having some of the cheapest!!
Many smaller US oil companies were jumping on the OIL RUSH bandwagon using lots of debt to fund their operations when oil prices were higher & thus when oil prices dropped they were left in a very RISKY & VOLATILE SITUATION.
As their profit margins no longer worked & it doesn’t pay to drill for them!!!
(Now I did a Full video Analysing the Oil Industry in more detail, So I won’t go into too much here) (You can check that video out on youtube)
Long story short, many investors are seeing this smaller oil companies which are over leveraged as very risky & I completely agree & will be staying away from Smaller companies.
WHAT ABOUT OIL ETF’s?
Oil and gas ETF’s or exchange-traded funds offer investors more direct and easier access to the often very volatile energy market.
While there is the potential for MASSIVE returns by investing in the oil and gas sector, the risks can be very high!!
Oil and gas ETFs offer you the ability to invest in a diversified portfolio of energy companies. They are basically a basket of selected energy stocks.
There is currently around 21 different oil & gas funds, but here are my top 3.
3. Energy Select Sector SPDR Fund (XLE)
XLE is the most historic, least expensive, and the one of the largest ETFs by a long shot.
XLE owns entirely US Oil Companies with a large weighting toward large market cap businesses.
Investing into this Oil ETF will give you access to EXXON MOBIL, CHEVRON and CONOCO PHILIPS (COP).
These are all GIGANTIC & WELL INTEGRATED OIL & GAS COMPANIES WHICH I WOULD SAY ARE THE SAFEST INVESTMENTS IN THE OIL INDUSTRY DURING THIS VOLTAILE TIME!
- Performance over 1 year: -45.90%
- Expense Ratio: 0.13%
- Annual Dividend Yield: 15.57%
- 3-Month Average Daily Volume: 35,639,676
- Assets Under Management: $8,331.3 million
- Inception Date: Dec 16, 1998
- Issuer: State Street SPDR
2. I Shares Global Energy ETF (IXC)
IXC differs from the previously mentioned fund in that it has a GLOBAL selection of LARGE CAP ENERGY STOCKS. Including
ROYAL DUTCH SHELL, EXXON MOBIL, CHEVRON, BP & many more.
These companies have a great integration of Oil & Gas which does help to reduce volatility when investing into the oil industry.
- Performance over 1 year: -44.8%
- Expense Ratio: 0.46%
- Annual Dividend Yield: 11.88%
- 3-Month Average Daily Volume: 950,047
- Assets Under Management: $690.8 million
- Inception Date: November 16, 2001
- Issuer: iShares
1. Global X MLP & Energy Infrastructure ETF (MLPX)
Coming in at number 1 is GLOBAL X MLP & ENERGY INFRASTRUCTURE ETF or MLPX.
This fund was the best Oil & Gas fund for Q2 of 2020 by it’s one year performance.
The MLPX follows the Solactive MLP & Energy Infrastructure Index
Thus this fund offers a basket of multi cap MLP funds (Master limited partnerships_
(Which are businesses with a company structure of MASTER LIMITED PARTNERSHIPS.
Thus this fund has a large concentration of Midstream Oil & GAS COMPANIES.
Mid stream companies are those which are involved in the processing, storage, transportation & marketing of oil & gas.
The MLPX fund’s top holdings are
an oil and gas pipeline companies such as:
TC Energy Corp. (TRP) & Enbridge Inc. (ENB),
In addition, to firms such as Williams Companies (WMB), an integrated energy firm.
- Performance over 1 year: -41.0%
- Expense Ratio: 0.45%
- Annual Dividend Yield: 10.10%
- 3-Month Average Daily Volume: 1,576,144
- Assets Under Management: $506.0 million
- Inception Date: August 6, 2013
- Issuer: Global X
HOW HAVE I INVESTED INTO THE OIL INDUSTRY?
Although the ETF’s offer a great way to diversify your portfolio when investing into the oil industry. I decided to invest in just a few of the LARGEST, MOST WELL INTEGRATED & most importantly those with a HEALTHY BALANCE SHEET & MINIMAL DEBT.
Thus I invested into ROYAL Dutch Shell & BP which both had a fantastic Valuation.
I personally don’t have more than 5% of my portfolio in oil stocks.
As the Oil industry can be extremely volatile & risky so ensure you understand your own risk tolerance & your own investing goals.
Now remember this is not financial advice, so please do your own research prior to investing into any stock we mention on this channel.
Having said that my oil stocks are currently oil up by around £2000 in just a few weeks which is a good sign!
For my full analysis of the global Oil industry & the stocks I’ve invested check out the link below.
SO DO YOU THINK THE OIL INDUSTRY WILL RECOVER?
Comment on the youtube video!
