The past few weeks have been rough on crude oil, as the massive commodity has been seeing a major decline in price. But with a sudden drop, this fossil fuel may be offering in a nice entry point to investors looking to add some energy exposure to their portfolio. Since peaking in mid-September, crude has suffered losses of nearly 14%, as market turmoil has led to a healthy sell-off. Much of the speculation was sparked by the uncertainty over the presidential election and which candidate would come out on top [for more crude oil news and analysis subscribe to our free newsletter].
Now that Obama has secured another four years in the office, crude may be able to make a comeback. Though Romney was seen as better for crude oil, the Obama administration will put plans in place to make the U.S. the largest producers of oil in the world in less than 10 years. Whether that actually happens is a different story, but with crude sitting well below $100/barrel, many investors are eyeing what could be a great buying opportunity. Below, we outline three ways to add crude to your portfolio when you decide it is time to hop in on this vital energy source.
United States Oil Fund (USO): This fund tracks front-month WTI futures and is among the most popular commodity products in the world. Its single contract futures strategy means that it will not be a great candidate for long-term buys but rather as a trading instrument; USO trades more than 8.9 million shares each day [see also How to Trade Crude Oil Futures].- Energy Select Sector SPDR (XLE): This fund will be a play on the production side of things, as it invests in the largest oil and gas companies in the US. Top holdings include big players like Exxon Mobil (XOM), Chevron (CVX), and Schlumberger (SLB) among many others. The fund is home to more than $7 billion in assets and pays out a dividend of about 1.7%.
- Market Vectors Unconventional Oil & Gas ETF (FRAK): One of the more unique products currently on the market, FRAK is designed to offer exposure to companies that involved in unconventional oil and gas. For the most part these firms use budding technologies like fracking and are often considered the future of the energy industry. Note that this is a very young fund and does not offer exceptional liquidity, so investors will need to take a close look before investing.
Don’t forget to subscribe to our free daily commodity investing newsletter and follow us on Twitter @CommodityHQ.
Disclosure: No positions at time of writing.
[...] Crude oil prices closed higher today after escalating tensions in the Mideast had traders worried about potential supply disruptions. Meanwhile, other commodity prices ended mixed, with gold, silver, corn and soybeans edging higher and copper and wheat futures closing lower. [...]
[...] of engineering, procurement and construction services for large and complex upstream and downstream projects, including LNG and GTL facilities. As of 2011, gas monetization accounted for the majority of KBR’s revenues, which increased 8% year-over-year to over $3 billion. Investors looking to play the infrastructure part of the fracking boom may want to consider this company, with its modest 19.5-times price-earnings ratio [see also Time To Buy Oil?] [...]