As COVID-19-pandemic-led restrictions are easing worldwide with a solid progress on the vaccination front, the demand for oil is rising with increasing mobility and the resumption of industrial activities. This, coupled with continued supply cuts by the major oil producing countries, is leading to a surge in oil prices. The U.S. benchmark WTI Crude hit a 32-month high and Brent Crude surpassed the $73 a barrel mark on June 14.

Furthermore, according to a Research and Markets report, the global oil and gas pipeline market is expected to grow at a CAGR of more than 6% between 2021 -2026. And, despite decent progress in the U.S.-Iran talks regarding the lifting of sanctions, Goldman Sachs expects crude oil to rise to $80 per barrel by the end of the year. Also, even though production cuts may not continue for long, increasing demand for oil is expected to buoy the price rally. While it may be risky to bet on a particular energy stock to benefit from rising oil prices, a less risky way to do so could be to bet on energy ETFs.

We think relatively less followed energy funds United States Oil Fund, LP (USO), Global X Uranium ETF (URA), and United States Natural Gas Fund, LP (UNG) could be solid additions to one’s  portfolio now.

United States Oil Fund, LP (USO)

Launched and managed by United States Commodity Funds LLC, USO offers exposure to one of the world’s most important commodities—oil. The fund gets exposure to oil using derivatives, including several oil ETPs, and also uses futures contracts to invest in light, sweet crude oil, other types of crude oil, diesel-heating oil, gasoline, natural gas, and other petroleum-based fuels.

With $3.12 billion in AUM, USO’s top holding is Sweet Light Crude Oil (WTI), which has a 100% weighting in the fund. Its 0.79% expense ratio is the same as the category average.

USO has gained 82.8% over the past year and 79.4% over the past nine months.

USO’s POWR Ratings are consistent with its growth outlook. It has an overall A rating, which equates to Strong Buy in our proprietary rating system. It has an A grade for Buy & Hold, Trade, and Peer also. Get all the USO ratings here.

USO is ranked #4 of 112 ETFs in the A-rated Commodity ETFs group.

Global X Uranium ETF (URA)

URA is an exchange traded fund launched and managed by Global X Management Company LLC. The fund invests in the stocks of companies that operate across energy, oil, gas and consumable fuels, coal and consumable fuels, and the uranium ores sectors. It seeks to track the performance of the Solactive Global Uranium & Nuclear Components Total Return Index by using full replication techniques.

Cameco Corporation (CCJ) has a 24.04% weighting in the fund as its top holding, followed by National Atomic Company Kazatomprom JSC Sponsored GDR RegS at 22.86%, and NexGen Energy Ltd. (NXE) at 5.74%. The fund has $830.90 million in AUM. It has a 0.69% expense ratio versus the 0.62% category average.

URA pays $0.26 annually in dividends to its investors, which yields 1.18%. Its average four-year dividend yield stands at 2.41%. Over the past year, the fund has gained 100.7%. It  has returned 82.7% over the past nine months.

It’s no surprise that URA has an overall B rating, which equates to Buy in our proprietary rating system. It has an A grade for Trade, and a B grade for Buy & Hold.

Click here to access URA’s Peer grade as well. URA is ranked #66 in the Commodity ETFs  group.

United States Natural Gas Fund, LP (UNG)

Launched and managed by United States Commodity Funds LLC., UNG uses future contracts to invest in natural gas. The fund seeks to track daily changes in percentage terms of the price of natural gas delivered at the Henry Hub, Louisiana, as measured by the daily changes in the price of a specified short-term futures contract.

UNG has $256.70 million in AUM. Its top holdings include Natural Gas with a 100% weighting in the fund. The fund’s 1.28% expense ratio compares to the 0.79% category average.

UNG  has gained 28.4% year-to-date and generated 22.8% returns over the past six months.

UNG’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to Buy in our proprietary rating system. It also has a B grade for Trade.

UNG is ranked #69 in the Commodity ETFs group. In addition to this, one can access UNG’s Buy & Hold and Peer grade here.

USO shares were trading at $48.70 per share on Tuesday morning, up $0.38 (+0.79%). Year-to-date, USO has gained 47.53%, versus a 13.86% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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