Table of Сontents
- What Are Crude Oil ETFs and How Do They Work?
- Evaluating an Oil ETF
- 3 Best-Performing Oil ETFs
- Bottom Line
Without actually owning the item, oil ETFs provide investors exposure to the market price. A list of the top oil ETFs as of January 31, 2022, is available.
What Are Crude Oil ETFs and How Do They Work?
Exchange-traded funds called crude oil ETFs aim to replicate the price of crude oil minus costs. Oil ETFs provide you indirect exposure to changes in WTI or Brent crude oil prices without the need to keep the underlying commodity in your possession. Oil ETFs may buy crude oil futures contracts to fulfill this goal.
Crude oil is frequently used to make lubricating oils, heating oils, tar, jet fuel, and other types of motor fuel including gasoline, diesel, and jet fuel. Some investors use oil as a strategy to diversify their portfolios outside of more conventional investing assets like equities or bonds. There are now 11 crude oil exchange-traded funds (ETFs) available, 7 of which are based on commodities. The remaining 4 oil funds
Evaluating an Oil ETF
The process of selecting the best oil ETFs based on performance to meet an investor’s goals may start by reducing the options with an ETF screener, just as with any other sort of investment. The majority of screeners will include oil ETFs in both the “commodities-oriented” subclass and the commodities category or asset class.
Investors can use the following selection criteria to assess oil ETFs:
- Performance: On our list of the best oil ETFs, performance is judged mostly based on a 1-year return. Before considering the purchase of shares, however, investors would be advised to look at returns over longer time frames, such as three, five, and ten years.
- Expenses: The ETF with the lowest cost ratio will often beat those with higher expenditures when they follow the same index or commodity as other ETFs. In comparison to other ETFs that track the price of a benchmark for crude oil, the oil ETFs on our list have lower expense ratios.
- Structure: While the majority of equities and bond ETFs are formed as open-ended investment firms, many oil ETFs are structured as partnerships. ETNs, or exchange-traded notes, are debt instruments that mirror an index, and some oil funds use this structure. ETNs are not included in our list of oil ETFs.
- Objective: Only ETFs that aim to replicate the price of crude oil, excluding trust charges, are taken into account for our ranking of the best oil ETFs. For the purposes of this list, other oil ETF goals and strategies, such as those for gas and natural gas, oil and gas exploration, inverse ETFs, and leveraged ETFs, were disregarded.
- Portfolio holdings: Unlike mutual funds that invest in stocks or bonds, ETFs that follow the price of crude oil often own futures contracts that reflect the price of a benchmark oil price.
- Quant Ratings and Factor Grades: Seeking Stocks and ETFs may be evaluated using Alpha’s Quant Ratings and Factor Grades. We offer Factor Grades in this article, which ranks ETFs according to five “factors”: momentum, expenses, dividends, risk, and asset flows. In order to accomplish this, we contrast the pertinent data for the factor in question for the ETF with the comparable metrics for the other ETFs in the same asset class. After then, the factor receives a grade ranging from A+ to F.
- Important: Limited partnership-style oil ETFs treat owners more like partners than investors. As a result, these funds are pass-through investment vehicles that transfer annual income and gains/losses to the partners and fund shareholders rather than paying federal taxes at the fund level. Consequently, this futures-contract ETFs offer
3 Best-Performing Oil ETFs
Our ranking of the best oil ETFs based on market performance is determined by the top 1-year returns through January 31, 2022. Investors should be aware that historical results do not guarantee future outcomes and that oil ETFs invest in futures contracts, which can lead to significant and unpredictable price fluctuations.
| ETF | 1-Year Performance |
| United States Oil Fund ETF | 77.60% |
| United States Brent Oil Fund LP ETF | 75.94% |
| ProShares K-1 Free Crude Oil Strategy ETF | 72.74% |
1. United States Oil Fund ETF
A publicly listed exchange-traded fund called United States Oil Fund ETF (USO) aims to track the percentage change in the spot price of light sweet crude oil delivered to Cushing, Oklahoma, as determined by the daily movements of the Benchmark Oil Futures Contract.
- As of date: January 31, 2022
- 1-year performance: 77.60%
- Expense Ratio: 0.83%, or $83 annually for every $10,000 invested
- Annual Dividend Yield: None
- Three-Month Average Daily Volume: 8.4 million
United States Oil Fund ETF Performance
| 1-Yr Return | 3-Yr Return | 5-Yr Return | 10-Yr Return | |
| United States Oil Fund ETF | 77.60% | -11.72% | -7.15% | -14.59% |
| Bloomberg Commodity TR | 34.73% | 11.01% | 5.39% | -2.27% |
| S&P 500 | 23.29% | 20.71% | 16.78% | 15.43% |
For the 1-year return, USO greatly exceeds the larger index, Bloomberg Commodity TR, as well as the U.S. equity index, S&P 500. However, whether measured against a basket of commodities or the S&P 500, USO’s longer-term returns are significantly lower.
A $10,000 investment in USO made on January 31, 2022, would be in the following positions after one year, three years, five years, and ten years:
- 1 year ago: $17,600
- 3 years ago: $6,880
- 5 years ago: $6,901
- 10 years ago: $2,066
USO ETF Structure, Objective & Holdings
- Inception Date: 04/10/2006
- Sponsor: United States Commodity Funds LLC
- Ticker: USO
- Primary Exchange: NYSE Arca
- Structure: Partnership
- Objective: Track the price of WTI crude oil.
- Holdings: WTI crude oil futures.
USO ETF Quant Rating Grades
| Momentum | Expenses | Dividends | Risk | Asset Flows |
| A | D+ | — | D- | B+ |
2. United States Brent Oil Fund LP ETF
An exchange-traded fund called the United States Brent Oil Fund LP ETF (BNO) aims to follow changes in the price of Brent crude oil on a daily basis. The near-month futures contract traded on the ICE Futures Exchange serves as the benchmark for BNO.
- As of date: January 31, 2022
- 1-year performance: 75.94%
- Expense Ratio: 0.90%, or $90 annually for every $10,000 invested
- Annual Dividend Yield: None
- Three-Month Average Daily Volume: 1.9 million
United States Brent Oil Fund ETF Performance
| 1-Yr Return | 3-Yr Return | 5-Yr Return | 10-Yr Return | |
| United States Brent Oil Fund ETF | 75.94% | 11.94% | 9.68% | -4.59% |
| Bloomberg Commodity TR | 34.73% | 11.01% | 5.39% | -2.27% |
| S&P 500 | 23.29% | 20.71% | 16.78% | 15.43% |
BNO considerably exceeds both the S&P 500 U.S. stock index and the larger Bloomberg Commodity TR index for the 1-year return. Over longer time frames, BNO’s returns also beat the commodities index. Though much lower than the S&P 500, USO’s returns over a longer time frame.
A $10,000 investment in BNO would be worth the following on January 31, 2022, after one year, three years, five years, and ten years.
- 1 year ago: $17,594
- 3 years ago: $14,027
- 5 years ago: $15,782
- 10 years ago: $6,251
BNO ETF Structure, Objective & Holdings
- Inception Date: 06/01/2010
- Sponsor: United States Commodity Funds LLC
- Ticker: BNO
- Primary Exchange: NYSE Arca
- Structure: Partnership
- Objective: Track the price of Brent oil.
- Holdings: Brent crude oil futures.
BNO ETF Quant Rating Grades
| Momentum | Expenses | Dividends | Risk | Asset Flows |
| A+ | D | — | D- | D |
3. K-1 Free Crude Oil Strategy ETF
The Bloomberg Commodity Balanced WTI Crude Oil Index is what the ProShares K-1 Free Crude Oil Strategy ETF (OILK) attempts to mimic in terms of investment performance. It may be appealing to some investors who seek to participate in oil ETFs but instead receive 1099 as OILK is the first crude oil ETF that doesn’t send its shareholders a K-1.
- As of date: January 31, 2022
- 1-year performance: 72.74%
- Expense Ratio: 0.67%, or $67 annually for every $10,000 invested
- TTM Yield: 43.77%
- Average Daily Volume: 47,744
K-1 Free Crude Oil Strategy ETF Performance
| 1-Yr Return | 3-Yr Return | 5-Yr Return | 10-Yr Return | |
| K-1 Free Crude Oil Strategy ETF | 72.74% | -6.81% | -4.40% | NA |
| Bloomberg Commodity TR | 34.73% | 11.01% | 5.39% | -2.27% |
| S&P 500 | 23.29% | 20.71% | 16.78% | 15.43% |
For the 1-year return, USO greatly exceeds the larger index, Bloomberg Commodity TR, as well as the U.S. equity index, S&P 500. However, as compared to a basket of commodities and the S&P 500, USO’s longer-term returns are significantly lower and even negative.
A $10,000 investment made in OILK one year, three years, and five years ago might look like this as of January 31st, 2022:
- 1 year ago: $17,274
- 3 years ago: $8,093
- 5 years ago: $7,985
OILK ETF Structure, Objective & Holdings
- Inception Date: 09/26/2016
- Sponsor: ProShare Advisors LLC
- Ticker: OILK
- Primary Exchange: BATS
- Structure: Open Ended Investment Company
- Objective: Track the price of WTI crude oil.
- Holdings: WTI crude oil futures contracts.
OILK ETF Quant Rating Grades
| Momentum | Expenses | Dividends | Risk | Asset Flows |
| D- | A- | A+ | F | D+ |
Tip: Although it is frequently the case, commodities ETFs with the lowest expense ratios may not necessarily perform better than those with higher fees. Different ETFs may employ various investing strategies and encounter varying levels of tracking inaccuracy.
Bottom Line
Oil exchange-traded funds (ETFs) aim to mimic the price changes of an oil benchmark like WTI or Brent crude. Since many oil ETFs use futures contracts, owners don’t really own the physical product. Investors should be aware that short-term fluctuations in the price of oil can be considerable.
The material in this article is for informational purposes only; it is under no circumstances advice to purchase or sell stocks. Additionally, previous success does not guarantee future success.
