Today’s ETF universe is Energy. The universe constituents are available on GitHub, and we’ll be posting links to fundamental research below. Two ETFs operate in clean and solar energy, but the vast majority of the universe’s market capitalization is either oil and natural gas commodities contracts or involved in the production of oil and natural gas. There are short products through ERY, UCO, and DGAZ.
Energy companies typically fall into three categories: upstream, midstream, and downstream. Upstream companies are primarily concerned with the discovery and extraction of natural resources. Midstream companies store resources and transport them to downstream companies, which refine, market, and sell to end-users. The ETFs generally reflect splits along these lines, with an additional sector called “Equipment & Services” that exists mostly to support upstream and midstream businesses and has less exposure to the spot price of oil or gas.
Ultimately, the supply of and demand for the resources that these companies generate will determine the price of the underlying commodities. However, other factors like government stockpiling, political uncertainty, and artificial control by the Organization of Petroleum Exporting Countries (OPEC) will have an impact as well. The complexity of energy’s value chain is part of what makes it uncorrelated to US markets.
Alex Otsu
Crude Oil: USO, BNO, UCO, SCO (short):
Natural Gas: UNG, UGAZ, DGAZ (short):
Alex Otsu
S&P Energy Companies: XLE, IYE, VDE, XOP, ERX, ERY (short):
Alex Otsu
Clean energy: ICLN, TAN (solar):
Energy Midstream: AMJ, AMLP
Alex Otsu
Equipment & Services: XES, OIS
Alex Otsu
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