Top Ways to Trade the Potential Return of Gushing Oil Prices

Aug 24, 2022

Oil prices are gushing higher – again.

All after Saudi Arabia floated the idea of OPEC+ output cuts to support oil prices. That is, if Iranian crude returns to the market, and if there’s a drop in U.S. inventories.

“Much of the impetus behind today’s strength is being driven by comments out of Saudi Arabia alluding to a possible output cut in an attempt to ‘stabilize’ the market,” said Jim Ritterbusch of oil trading advisory firm Ritterbusch and Associates, as quoted by Reuters. “Of course, from the Saudis’ perspective, stable prices equal high prices and instability equals low prices.”

If OPEC+ eventually decides to cut output, investors can always invest in Exxon Mobil (XOM), Chevron Corp. (CVX), or even Occidental Petroleum (OXY).  Or, there’s always ETFs, such as:

SPDR Energy Select Sector ETF (XLE)

At $81 with an expense ratio of 0.10%, the XLE ETF provides exposure to companies in the oil, gas and consumable fuel, energy equipment and services industries, as noted by State Street SPDR. Not only does an ETF allow for diversification, you can buy it for less. 

SPDR S&P Oil & Gas Exploration & Production ETF (XOP)

At $146 with an expense ratio of 0.35%, the ETF provides exposure to the oil and gas exploration and production segment of the S&P TMI, which comprises the following sub-industries: Integrated Oil & Gas, Oil & Gas Exploration & Production, and Oil & Gas Refining & Marketing, as noted by State Street SPDR.  Some of its top holdings include Callon Petroleum, SM Energy Company, Devon Energy Corporation, EOG Resources, and ConocoPhillips.

iShares Global Energy ETF (IXC)

The iShares Global Energy ETF seeks to track the investment results of an index composed of global equities in the energy sector. Trading at $38, some of its top holdings include Exxon Mobil, Chevron Corporation, BP PLC, Total SA, and EOG Resources.  The IXC ETF has a current expense ratio of 0.40%.

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