Oil prices skyrocketed more than 12% on June 13, following a major military escalation in the Middle East. Brent crude jumped above $78 per barrel, while WTI crude rose to nearly $77 — the highest level in four months. With this rally, oil is on course for its largest weekly gain since 2022.
The impressive jump in oil prices has a big impact on oil ETFs, helping these to gain as well. United States Oil Fund USO, United States Brent Oil Fund BNO, Invesco DB Oil Fund DBO, Invesco DB Energy Fund DBE and United States 12 Month Oil Fund USL are popular oil ETFs that could be interesting plays to directly deal with in the futures market.
What Happened?
Israel launched a series of airstrikes on Iran’s nuclear and ballistic missile facilities, targeting key infrastructure and military leaders. The move heightened geopolitical tensions and triggered a wave of risk-off sentiment across global markets. Iran is preparing to retaliate, raising concerns about disruptions and contagion in neighboring oil-producing nations (read: Oil ETFs Surge on Iran Tensions: Can the Rally Last?).
The situation has raised concerns about potential supply disruptions from the oil-rich region, especially via the Strait of Hormuz, which transports around one-third of the world’s seaborne oil. Analysts warned that disruption of up to 20 million barrels per day in extreme retaliation could be at stake.
Analysts warn that if the conflict drags on or draws in other regional powers, crude prices could breach the $100 mark.
ETFs in Focus
United States Oil Fund (USO)
United States Oil Fund is the most popular ETF in the oil space, with an AUM of $916.5 million and an average daily volume of 5 million shares. It seeks an average daily percentage change in USO’s net asset value for any period of 30 successive valuation days within plus/minus 10% of the average daily percentage change in the price of the Benchmark Oil Futures Contract over the same period. United States Oil Fund has an expense ratio of 0.70%.
United States Brent Oil Fund (BNO)
United States Brent Oil Fund provides direct exposure to the spot price of Brent crude oil, as measured by the daily changes in the price of BNO’s Benchmark Oil Futures Contract. The Contract is the futures contract on Brent crude oil as traded on the ICE Futures Exchange, which is the near-month contract to expire. If the near-month contract is within two weeks of expiration, the Benchmark will be the next month's contract to expire. United States Brent Oil Fund has amassed $87.5 million in its asset base and charges 94% as annual fees and expenses. Volume is good as it exchanges 639,000 shares a day on average.
Invesco DB Oil Fund (DBO)
Invesco DB Oil Fund provides exposure to crude oil through WTI futures contracts and follows the DBIQ Optimum Yield Crude Oil Index Excess Return. The Index is a rules-based index composed of futures contracts on WTI. Invesco DB Oil Fund has an AUM of $209.1 million and charges 75 bps of annual fees. DBO trades in an average daily volume of 263,000 shares.
Invesco DB Energy Fund (DBE)
Invesco DB Energy seeks to track changes in the level of the DBIQ Optimum Yield Energy Index Excess Return plus the interest income. The benchmark is a rules-based index composed of futures contracts on some of the most heavily traded energy commodities in the world — light sweet crude oil (WTI), heating oil, Brent crude oil, RBOB gasoline and natural gas. Invesco DB Energy has AUM of $48.6 million and trades in an average daily volume of 22,000 shares. It charges 77 bps in annual fees (read: Oil Prices Rebound: Can the ETF Rally Last?).
United States 12 Month Oil Fund (USL)
United States 12 Month Oil Fund provides investors with exposure to the daily price movements of West Texas Intermediate’s light, sweet crude oil. USL's benchmark is the near-month futures contract to expire and the contracts for the following 11 months for a total of 12 consecutive months. If the near-month futures contract is within two weeks of expiration, the benchmark will be the next-month contract to expire and the contracts for the following 11 months. United States 12 Month Oil Fund is unpopular and less liquid, with an AUM of $40.3 million and an expense ratio of 0.79%. USL trades in an average daily volume of 6,000 shares.
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United States Oil ETF (USO): ETF Research Reports Invesco DB Oil ETF (DBO): ETF Research Reports United States Brent Oil ETF (BNO): ETF Research Reports Invesco DB Energy ETF (DBE): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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