The best ETFs to invest in oil

10 April 2024 - 15:00

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The dynamics of the authorities on the oil market have highlighted a potential movement in prices. Let’s see what the 3 most interesting products are.

The best ETFs to invest in oil

OPEC+’s recent moves to further reduce crude oil production have prompted an adjustment of projections for the year 2024. This decision, aimed at stabilizing the market and influencing oil prices internationally, is expected to impact the dynamics of oil supply and demand significantly.

The resulting downward revision in global oil production growth is set to lead to a notable decline in global oil reserves by the second quarter of 2024, according to the Energy International Agency.

In response to this inventory contraction, current forecasts indicate an increase in the spot price of Brent crude oil, which is estimated to reach an average of $88 per barrel in Q2 2024, marking an increase of $4 per barrel compared to previous estimates released in February of the same year.

In this article, we will do a comparative review of the three top performers on oil ETFs by analyzing the best products currently on the market. This analysis aims to highlight the peculiarities and differences between three main ETCs: WisdomTree Brent Crude Oil, WisdomTree Bloomberg Brent Crude Oil, and WisdomTree WTI Crude Oil.

1. WisdomTree Brent Crude Oil

This ETC is focused on tracking the performance of the Bloomberg Brent Crude Index, which tracks the price of Brent crude futures contracts. With managed assets of 1,557 million euro and a Total Expenditure Index (TER) of 0.49% per annum, it is positioned as one of the largest and most representative instruments for investors seeking exposure to Brent. Synthetic replication via swaps, an annual volatility of 27.51%, and the absence of currency hedging are things to consider.

2. WisdomTree Bloomberg Brent Crude Oil

Cheaper in terms of costs, with a TER of 0.25%, this ETC has a similar focus to its counterpart but stands out for its smaller size, with assets under management of just €8 million . Launched in 2015, it offers a more accessible option, although its smaller size may impact liquidity and volatility, the latter being slightly higher at 27.59%.

3. WisdomTree WTI Crude Oil

This ETC aims to track the Bloomberg WTI Crude Oil Multi-Tenor index, focusing on the WTI crude oil market. With assets under management of 758 million euros and a TER of 0.49%, it is positioned as a significant choice for investors interested in WTI. Its annual volatility of 29.74% reflects the potentially greater instability of the WTI market compared to Brent.

When analyzing the returns and risk profiles of WisdomTree’s oil ETCs, it is critical to consider historical performance alongside volatility metrics. These factors provide deeper insight into each fund’s resilience and potential in different market environments.

Comparative comparison between products

  • WisdomTree WTI Crude Oil showed notable growth on a three-year basis with an increase of +84.73%, despite relatively high volatility, with an annual percentage of 29.74%. This ETC has gone through significant ups and downs, as evidenced by its highest drawdown since the launch of -96.97%, underlining its exposure to intense market movements. However, it has recovered vigorously in some periods, as demonstrated by its annual return of +12.11% and upside of +37.40% in 2022.
  • Comparatively, WisdomTree Bloomberg Brent Crude Oil stands out with its impressive three-year returns of +103.44%, with one-year volatility of 27.59%. This fund benefited from a strong performance in 2022, with a gain of +49.07%, and has maintained consistent growth over time, with an increase since launch of +40.16%. This greater resilience is reflected in a risk profile with a less severe maximum drawdown since launch compared to WTI, at -72.22%.
  • Finally, WisdomTree Brent Crude Oil offers comparable performance, with an impressive three-year growth of +99.41%. Its annual volatility stands at 27.51%, positioning itself in line with the other ETCs examined. This fund has recorded a solid return of 11.05% year-on-year, supported by a strong recovery of +48.16% in 2022. Its maximum drawdown since launch stands at -82.98%.

When comparing these ETCs, it is clear that each presents a different balance of risk and reward. WisdomTree WTI Crude Oil, despite being the most volatile of the three, has demonstrated a strong ability to generate high returns in favorable times. On the other hand, WisdomTree Bloomberg Brent Crude Oil stood out with better three-year returns and a slightly lower risk profile. WisdomTree Brent Crude Oil, with returns and volatility comparable to its Bloomberg counterpart, offers investors another alternative for exposure to the Brent market.

This data highlights how oil price fluctuations directly influence these ETCs’ returns. Investors should therefore carefully evaluate their time horizon and risk tolerance when choosing among these instruments, considering both the potential rewards and risks associated with energy market volatilities.

The information and considerations contained in this article should not be used as the sole and principal basis on which to make investment decisions. The reader maintains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation for public savings.

Original article published on Italy 2024-04-07 20:21:00. Original title: I migliori ETC per investire sul petrolio

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