Energy ETFs Pull In Billions as Oil Rally Fuels Sector Gains
Investors have poured money into energy stock ETFs this year as oil prices have climbed to near their highest levels since 2022.
Roughly $13 billion has flowed into U.S.-listed energy equity ETFs. Of that, $5.1 billion has gone into the Energy Select Sector SPDR Fund (XLE), which tracks energy stocks in the S&P 500. Another roughly $1 billion has gone into the Vanguard Energy ETF (VDE), which includes smaller energy companies as well.
While those funds haven’t matched the eye-popping gains of oil futures ETFs like the United States Oil Fund (USO) and the United States Brent Oil Fund (BNO), which are up 70% and 79%, respectively, this year, they’ve still delivered standout returns.
XLE and VDE are each up about 39%, sharply outperforming the S&P 500’s 5% loss and making energy by far the best-performing sector in the stock market this year.
Because energy stocks make up only about 4% of the broader U.S. stock market, the rally hasn’t done much to help broad market ETFs, with weakness in much larger sectors such as technology and financials overwhelming the gains in energy stocks.
Investors who are bullish on energy and want to increase their exposure can use ETFs like XLE and VDE to do so.
Beyond those funds, there are also more niche ETFs focused on narrower parts of the energy market. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) has pulled in $745 million this year, while the Portfolio Building Block Integrated Oil & Gas Exploration & Production ETF (PBOG) has attracted $590 million. Meanwhile, the VanEck Oil Services ETF (OIH) has brought in $461 million.
Among those funds, XOP has performed the best, gaining more than 47% this year, followed by OIH with a 45% return. PBOG is up 40%, only slightly ahead of XLE.
XLE is market-cap weighted and heavily concentrated in two integrated oil giants, Exxon Mobil and Chevron, which together account for more than 40% of the fund.
XOP also holds those companies, but because it is equal weighted, Exxon and Chevron each carry only roughly the same 2% to 3% weighting as the fund’s other holdings. That gives smaller energy companies much more influence on returns.
OIH offers a different kind of exposure, focusing on oil services firms such as Schlumberger, Baker Hughes and Halliburton.
PBOG takes a more global approach. In addition to Exxon and Chevron, its top holdings include international energy majors such as Shell, TotalEnergies and BP.
In other words, investors have multiple ways to express a bullish view on energy, depending on whether they want broad U.S. sector exposure, a tilt toward smaller producers, a bet on oil services companies or a more global portfolio.
