Top Oil ETFs

BNO, OIL, and USO are the top oil ETFs

Man walking in front of an oil derrick

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For investors who expect oil to rise long term, three outperforming oil ETFs provide exposure to the commodity as crude prices have pulled back in the past week thanks to concerns about a slowing global economy and rising COVID cases in China.

United States Brent Oil Fund, iPath Pure Beta Crude Oil ETN, and United States Oil Fund LP providing exposure to oil futures contracts rather than a portfolio of oil stocks.

Key Takeaways

  • Oil prices have outperformed the broader stock market over the past year.
  • United States Brent Oil Fund, iPath Pure Beta Crude Oil ETN, and United States Oil Fund LP are top-performing funds tracking oil futures contracts.
  • The top holdings of the first of these ETFs are futures contracts for Brent Crude oil, and the biggest holdings for the second and third are futures contracts for West Texas Intermediate (WTI) sweet light crude oil.

There are six distinct oil commodity ETFs that trade in the United States, excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM). Oil prices, as measured by the Bloomberg Composite Crude Oil Subindex, have climbed 28% over the past 12 months, significantly outperforming the S&P 500 Index’s 14% drop, as of Nov. 18. We examine the top three oil ETFs below. All numbers are as of Nov. 17, 2022.

United States Brent Oil Fund (BNO)

  • Performance Over One-Year: 37.4%
  • Expense Ratio: 1.09%
  • Annual Dividend Yield: N/A
  • Three-Month Average Daily Volume: 415,055
  • Assets Under Management: $271.5 million
  • Inception Date: June 2, 2010
  • Issuer: Marygold Cos, Inc.

BNO is a commodity pool, a private investment structure that combines investor contributions to trade in the futures and commodities markets. BNO's aim is that daily percentage changes in its shares' net asset value (NAV) are mirrored in fluctuations in the spot price of Brent Crude oil. The price of Brent is measured by movements in the price of the BNO's Benchmark Oil Futures Contract. The ETF's benchmark is a near-month futures contract that is traded on the ICE Futures Exchange. Because Brent Crude often trades at a different price from West Texas Intermediate (WTI), BNO can be a useful way of gaining alternative exposure. Its primary holdings are Brent Crude oil futures contracts. BNO may also invest in forwards and swap contracts.

iPath Pure Beta Crude Oil ETN (OIL)

  • Performance Over One-Year: 28.8%
  • Expense Ratio: 0.57%
  • Annual Dividend Yield: N/A
  • Three-Month Average Daily Volume: 45,780
  • Assets Under Management: $68.2 million
  • Inception Date: April 20, 2011
  • Issuer: Barclays Capital

OIL is structured as an exchange-traded note (ETN), which is an unsecured debt security that trades like a stock. OIL targets the Barclays WTI Crude Oil Pure Beta TR Index. The benchmark mirrors the returns through an unleveraged investment in futures contracts in the crude oil market. The Index may combine several contracts with different expiration dates. OIL's sole holding is futures contracts of WTI sweet light crude oil. The ETF is heavily exposed to futures contracts that expire in one year, which reduces the short-term risks of contango. Note that on March 14, 2022, Barclays announced it had suspended any further sales from inventory and any further issuances of OIL due April 18, 2041, because of insufficient issuance capacity. Barclays said that any redemptions by the ETN's holders won't be affected, and the company said it plans to reopen sales and issuances as soon as it can accommodate added capacity. Issuances and sales of OIL resumed on Sept. 26, 2022.

United States Oil Fund LP (USO)

  • Performance Over One-Year: 27.5%
  • Expense Ratio: 0.81%
  • Annual Dividend Yield: N/A
  • Three-Month Average Daily Volume: 3,536,471
  • Assets Under Management: $2.2 billion
  • Inception Date: April 10, 2006
  • Issuer: Marygold Cos, Inc.

USO is structured as a commodity pool and targets a benchmark that is the near-month WTI crude oil futures contract for light, sweet crude oil delivered to Cushing, Oklahoma. The contract is traded on the New York Mercantile Exchange (NYMEX). USO invests in other oil-related contracts, and may invest in forwards and swap contracts. The sole holding of USO is futures contracts of WTI sweet light crude oil.

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Article Sources
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