Oil ETF

Loading the player...

DEFINITION of 'Oil ETF'

A category of exchange-traded funds that invest in companies engaged in oil and gas discovery, production, distribution and retail. Some oil ETFs may be set up as commodity pools – with limited partnership interests instead of shares – and invest in derivative contracts such as futures and options.

The benchmark target for an oil ETF may be a market index of oil companies or the spot price of crude itself, and funds may be focused on just United States-based companies or invest around the world. There are even inverse ETFs for oil and other sectors that move in an equal and opposite direction to the underlying index or benchmark. Oil ETFs will attempt to track their relevant index as closely as possible, but small performance discrepancies will be found, especially over short time frames.

BREAKING DOWN 'Oil ETF'

Oil ETFs have a high level of demand from investors because oil is such a pervasive commodity in the modern global economy. Almost every end product used by people, companies and governments is in some way affected by the price of oil, either as a raw component or through the costs of energy, transportation and product distribution.

RELATED TERMS
  1. Oil Services Industry ETF

    A sector exchange-traded fund (ETF) that invests in companies ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. ETF Of ETFs

    An exchange-traded fund (ETF) that tracks other ETFs rather than ...
  4. Natural Gas ETF

    Exchange-traded funds (ETFs) that invest in natural gas futures ...
  5. Energy ETF

    A broad class of ETFs that includes funds focused on oil and ...
  6. Inverse ETF

    An exchange-traded fund (ETF) that is constructed by using various ...
Related Articles
  1. ETFs & Mutual Funds

    Take Advantage of Cheap Oil, Invest in these ETFs

    With crude oil prices at record lows, investors should consider oil ETFs over oil company stocks as ETFs more closely mirror the price of oil
  2. Investing

    Investing in Oil Stocks vs. Oil Companies: What's the Difference? (USO)

    Learn about the major advantages, disadvantages and risks of investing in oil companies and investing in oil and gas exploration companies.
  3. Markets

    Oil Boom 2.0: Be Sure You Are Ready to Invest

    Learn about the potential for oil boom 2.0, and discover why some experts say this is a good time to invest in oil companies and ETFs.
  4. Retirement

    Looking to Add Oil Into Your IRA or Roth IRA? Here's How

    Learn the different ways investors can gain exposure to the price of oil and oil companies in their IRAs. See how individual oil stocks can be risky.
  5. Trading

    A Guide To Investing In Oil Markets

    Find out how to take advantage of this market without having to open a futures account.
  6. ETFs & Mutual Funds

    These Oil ETFs Offer Cheap, Easy Access

    Interested in investing in oil and the companies that extract and refine it? Here's a list of ETFs. Just be wary of fees.
  7. ETFs & Mutual Funds

    Top 5 Oil and Gas Bond ETFs for 2016 (USO, OIL)

    Discover the top five oil and natural gas bond ETFs with the potential to come out on top in 2016 as the industry looks toward a future rebound.
  8. ETFs & Mutual Funds

    The 3 Safest Oil ETFs and ETNs for 2016 (USL, OLO)

    Learn about oil's outlook for 2016 and where to find the "safest" exposure toward oil exchange-traded products and the risks associated with commodities.
  9. Investing

    How Can I Buy Oil As An Investment?

    Choices abound for investors who want to get involved with oil.
  10. ETFs & Mutual Funds

    It Might Be Too Late for Inverse Oil ETFs (SCO, DWTI)

    Learn why investors seeking to short the price of oil may want to be careful when using leveraged ETFs, and see how oil prices may have reached a bottom.
RELATED FAQS
  1. When you buy oil, do you have to buy thousands of stocks at one time or can you start ...

    I am new to oil stocks and want to invest a couple thousand dollars. Do oil stocks pay dividends? Is now the time to ... Read Answer >>
  2. Why do oil stock prices drop?

    Doesn't lower oil prices mean more profit for companies that use oil products?  ... Read Answer >>
  3. How can I buy oil as an investment?

  4. What causes oil prices to fluctuate?

    Discover how OPEC, demand and supply, natural disasters, production costs and political instability are some of the major ... Read Answer >>
  5. Are there leveraged ETFs that track the oil & gas drilling sector?

    Explore the investing options that are available through leveraged ETFs that can be used to track the oil and gas drilling ... Read Answer >>
  6. Besides oil companies, what businesses are hurt by cheap oil prices?

    Falling oil prices do not only affect oil companies. Learn what other types of businesses are unintended victims of the drop ... Read Answer >>
Hot Definitions
  1. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  2. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  3. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  4. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  5. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
  6. Real Rate Of Return

    The annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other ...
Trading Center