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Best Oil ETF UK – Compare Top ETFs 2021

Exchange Traded Funds (ETFs) are one the best ways to invest in the oil industry. This is because you can speculate on the future value of the asset without needing to worry about ownership or storage. There are several oil ETFs available in the UK.

In this guide, we review the best oil ETFs UK for 2021. We also show you how to invest in an oil ETF from the comfort of your home without paying any commission!

Best Oil ETF UK 2021 List

Here’s a quickfire overview of the best oil ETFs UK to consider in 2021. You can read our full analysis of each oil ETF by scrolling down.

  1. SPDR S&P Oil & Gas Exploration & Production ETF – Overall Best Oil ETF UK – Invest Now
  2. United States Oil Fund – Best Oil ETF to Access the West Texas Intermediate Benchmark – Invest Now
  3. ProShares UltraShort Bloomberg Crude Oil – Best ETF to Short-Sell Crude Oil (Leveraged) – Invest Now
  4. Energy Select Sector SPDR ETF – Best Oil ETF UK for the Wider Energy Sector
  5. MicroSectors US Big Oil 3x Leveraged ETN – Best Leveraged Oil ETF UK

Best Oil ETFs UK Reviewed

There are many metrics that you need to consider in your search for the best ETF for oil companies.

For example, is the ETF backed by futures, swaps, stocks, or another complex financial instrument? You also need to check the past performance of the respective oil ETF and what annual fees it charges.

To help clear the mist, below we discuss the best oil ETFs UK available in the market right now.

1. SPDR S&P Oil & Gas Exploration & Production ETF – Overall Best Oil ETF UK

We found that the best overall oil ETF UK is offered by leading fund provider SPDR. As the name suggests, the SPDR S&P Oil & Gas Exploration & Production ETF focuses on companies that are active in the oil and gas industries. This means that you will be investing in a basket of oil and gas stocks – all of which are listed in the US.

To give you an idea of how this ETF is weighted, the largest holdings consist of Diamondback Energy, Marathon Oil Corporation, Devon Energy Corporation, Pioneer Natural Resources Company, and Exxon Mobil. There are also holdings in Occidental Petroleum Corporation, Valero Energy Corporation, and EOG Resources Inc.

SPDR S&P Oil & Gas Exploration & Production ETF

On the one hand, it goes without saying that this ETF will perform better when the value of oil is on the rise. After all, companies involved in the oil industry will be able to charge a higher price for their product. However, the correlation between oil prices and the value of the respective stocks is not an exact science. This is because there are plenty of other metrics at bay.

For example, many oil shares within the SPDR S&P Oil & Gas Exploration & Production ETF are involved in mining. As such, the costs involved in extracting the oil and distributing it to the end market will vary quite considerably. Nevertheless, in the 12 months prior to writing this page, this oil ETF has generated gains of 34.65%.

Over a 10-year period, the fund is actually down. However, this is just the nature of the oil industry – as this asset class is super volatile. As such, this should be a reminder that oil ETFs are not a substitute for long-term investments. On the contrary, you’ll want to enter and exit the market at the right time – based on the direction of global oil prices – so they’re better as short-term investments.

Your capital is at risk.

2. United States Oil Fund – Best Oil ETF to Access the West Texas Intermediate Benchmark

There are two key oil benchmarks that provide prices to the global trading scene. The first is Brent Crude Oil – which covers most of Europe. You then have the West Texas Intermediate (WTI) – which is primarily based on US oil prices. If you’re interested in gaining exposure to the latter – then the United States Oil Fund is probably the best option on the table.

United States Oil Fund (USO)

Put simply, this oil ETF is able to closely mirror the WTI benchmark by buying and selling futures. As an indirect investor, you don’t need to worry about the oil futures settling – as this is taking care of by the ETF provider. In terms of the specifics, you will pay an annual expense ratio of 0.79% – which is fairly reasonable when you consider the costs involved in futures rollovers.

Your capital is at risk.

3. ProShares UltraShort Bloomberg Crude Oil – Best ETF to Short-Sell Crude Oil (Leveraged)

If you’ve got a bit of experience in the online trading scene – then this particular oil ETF might be of interest. In a nutshell, the ProShares UltraShort Bloomberg Crude Oil ETF allows you short-sell oil. That is to say, this is an ‘inverse’ fund – meaning that you will make money if the value of oil goes down.

This is a good tool to have at your disposal if you are actively looking to trade oil. After all, oil is a volatile commodity that moves up and down based on wider demand and supply forces. As such, if you think that the price of oil has hit a ceiling, this ETF allows you to profit from this in a cost-effective way.

ProShares UltraShort Bloomberg Crude Oil (SCO)

In particular, the ProShares UltraShort Bloomberg Crude Oil would have been a great option in the midst of the coronavirus pandemic – where the Brent Crude Oil benchmark hit lows of sub-$20. An additional feature of this oil ETF is that it is leveraged by a factor of 2x.

So, if the value of the oil ETF went down by 5% in the open marketplace – you would be looking at gains of 10%. This is because you are speculating on the value of oil decreasing. However, if the oil ETF increased in value by 5%, your losses would amount to 10%. As such, this oil ETF is only suited to those of you that understand the risks of leveraged products.

Your capital is at risk.

4. Energy Select Sector SPDR ETF – Best Oil ETF UK for the Wider Energy Sector

As we have noted several times on this page, oil is a volatile asset class that isn’t suitable as a long-term investment. With that in mind, it is worth considering an ETF that diversifies into several different fields from within the wider energy sector. In this respect, we like the look of the Energy Select Sector SPDR ETF.

This ETF will give you access to 23 stocks that are actively involved in the US energy arena. This best SPDR ETF is somewhat overexposed to Exxon Mobil and Chevron – with a weight of 24.5% and 21.1% respectively. However, there are more modest holdings in the likes of ConocoPhillips, Schlumberger NV, EOG Resources Inc., and Pioneer Natural Resources Company.

The Energy Select Sector SPDR® Fund

Crucially, although this ETF focuses on oil and gas stocks, there is also exposure to other niches in this space. This includes energy equipment and supplies, as well as consumable fuels. When it comes to performance, the Energy Select Sector SPDR fund has returned gains of 11.8% over the past 12 months.

Year-to-date, which takes us up to mid-March 2021 – the fund is up 27%. In terms of fees, this particular ETF charges an annual expense ratio of just 0.12%. This means that a £1,000 investment would cost you just £1.20 per year. Plus, when investing through eToro – like all of the ETFs on our list – you won’t pay any ETF dealing fees.

Your capital is at risk.

5. MicroSectors US Big Oil 3x Leveraged ETN – Best Leveraged Oil ETF UK

If you are super bullish on oil – meaning you think that in the short-to-medium term its value is likely to continue to rise, then you might want to consider the MicroSectors US Big Oil 3x Leveraged ETN. Now, before we explain the fundamentals of this investment – there are two important points to note.

First and foremost, this is an ETN (Exchange-Trade Note) as opposed to a conventional ETF. This means that part of the fund consists of debt. As such, not only do you have to consider market risk (i.e. the value of oil going down), but also the financial risk associated with the debt instruments held by the provider.

Secondly, and as the name suggests – the MicroSectors US Big Oil 3x Leveraged ETN is leveraged by a factor of three. This means that any gains and losses that you encounter will be tripled. For example, if the fund increases in value by 20% – you will make gains of 60%, less fees.

MicroSectors US Big Oil 3X

However, if the fund went down by just 10%, your losses would stand at 30%. Nevertheless, in terms of how this ETN works, you will be investing in 10 large-cap stocks that are actively involved in the oil industry. Each of the 10 stocks has an equal weighting of 10%.

This includes Phillips 66, Marathon Petroleum Corp, Occidental Petroleum, Exxon Mobil Corp, Chevron Corp, and five other equities. When it comes to performance, it goes without saying that the MicroSectors US Big Oil 3x has generated huge returns over the past 12 months – fully in-line with the recovery of global oil prices.

For example, For example, in the first 2 1/2 months of 2021 – the fund is up over 147%. Over the past 12 months, the fund has generated gains of 315%. However, don’t forget that this ETN is leveraged by a factor of three. As such, this is a super high-risk financial instrument – so make sure you tread with caution and have clear entry and exit targets.

Your capital is at risk.

List of Oil ETFs

As per our own research into the best oil ETFs UK, we think that the five options discussed above are worth considering. However, there are many other ETFs to choose from that we have covered.

With this in mind, below you will find a list of oil ETFs that you might also consider.

  • Direxion Daily S&P Oil & Gas Exp. & Production
  • VanEck Vectors Oil Services ETF
  • Credit Suisse X-Links Crude Oil Shares
  • Invesco Dynamic Oil & Gas Services ETF
  • United States Brent Oil Fund LP
  • ProShares K-1 Free Crude Oil Strategy ETF
  • iShares MSCI Global Energy Producers ETF
  • iPath Pure Beta Crude Oil ETN

If one of the entries from the above list of oil ETFs is of interest – you can head over to the provider’s website to find out how it works.

How to Choose the Best Oil ETFs to Invest in

There are dozens of oil ETFs to choose from – each of which will have its own risks, potential rewards, and overall objectives. As we have covered, there are oil ETFs to suit all taste buds – including the ability to invest with leverage and even short-sell the asset.

As this particular area of the financial investment space is somewhat complex – below we discuss how you can choose the best oil ETF UK for you and your financial goals.

Oil ETF Objective

Make no mistake about it – the most important thing to consider when searching for the best oil ETF UK is to understand what the objective of the fund is. After all, the ETF provider will not buy physical barrels of oil. On the contrary, it will give you exposure to the oil industry through a specific set of financial instruments.

best oil etf uk

For example, many ETFs will look to buy shares in stocks that are involved in the oil and gas sectors. This might include large-cap companies like Exxon Mobil, BP, or Royal Dutch Shell, as well as oil tanker stocks such as Euronav.

With that said, some oil ETFs will also look to invest in much smaller stocks. This might include small oil operations that are involved in mining and exploration. In other cases, the oil ETF might give you access to this marketplace via futures. This is the case with the United States Oil Fund – which buys and sells futures to mirror the WTI benchmark index.

Long or Short

As we discussed in our list of the best Brent Oil ETFs, there are options that allow you to go long and short on this volatile asset class. Most of you will likely be looking to invest in commodities via an oil ETF because global prices are due to rise. This is fine, as most oil ETFs serve this purpose.

However, there are also ETFs like the ProShares UltraShort Bloomberg Crude Oil – which allows you to do the opposite. That is to say, by investing in this ETF you are speculating on the value of oil going down. If it does, you make a profit. As we noted earlier, investing in this ETF in early 2020 when oil prices collapsed would have been a shrewd move.

Leveraged

There are also a number of oil ETFs that are leveraged financial products. This means that both your profits and gains will be multiplied by a certain factor.

  • For example, the previously discussed ProShares UltraShort Bloomberg Crude Oil ETF is leveraged at 2x.
  • As such, 2% gains will stand at 4%, while 1% losses will stand at 2%.
  • You then have the MicroSectors US Big Oil ETN, which is leveraged at a factor of 3x.

Once again, you do need to tread with caution when investing in leveraged oil ETFs. This is because your losses can spiral out of control should you not install sensible risk-management tools – such as a stop-loss order.

Performance vs Benchmark

If you are looking for a financial instrument that tracks the value of Crude Oil or WTI Oil, then you might be best suited for a CFD trading platform. This is because CFDs track the underlying market benchmark like-for-like. However, when you invest in an ETF – this won’t be the case.

oil price benchmark

67% of retail investor accounts lose money when trading CFDs with this provider.

After all, the ETF isn’t buying and storing barrels of oil. Instead, it will hold relevant shares, futures, or swaps. With this in mind, there will always be a disparity between the rise and fall of global oil prices against that of your chosen ETF. This is important, as by choosing the wrong ETF, your correct speculation on the future price of oil might not be financially realized.

Let’s look at an example to clear the mist:

  • In the 12 months prior to writing this page, Brent Crude Oil was priced at $26.29 per barrel
  • Today, Brent Crude Oil is priced at $67.95
  • This means Brent Crude Oil has increased in value by over 158% over a 1-year period
  • Over the same period, the SPDR S&P Oil & Gas Exploration & Production ETF has increased by 181% – meaning it has outperformed the market
  • However, theUnited States Oil Fund has increased by just 16% over the same  1-year period

As you can see from the above, there can and will be a huge disparity between the growth (or decline) of an oil ETF against that of actual benchmark prices.

Fees

All ETF providers charge a fee for giving you access to your chosen marketplace. In the vast majority of cases, oil ETF fees – known as the ‘Expense Ratio’, will cost you less than 1% per year.

For example

  • The Energy Select Sector SPDR ETF comes with an annual fee of just 0.12%.
  • Then you have the United States Oil Fund – which is considered to be expensive, costs just 0.79% per year.

With that said, you also need to consider the fees charged by your chosen stock broker. This is because the provider might charge an ETF dealing fee. If they do, you will pay this when you buy the oil ETF and again when you cash out. As we cover shortly, eToro allows you to buy and sell oil ETFs without paying any commission at all.

Best Oil ETF UK Investment Platforms 2021

Once you have found an oil ETF that you like the look of, you then need to find a UK share dealing account that gives you access. Take note, you should never sign up with a brokerage site just because it offers the asset you wish to invest in.

On the contrary, you need to check key metrics like minimum account balances, ETF dealing fees, payment methods, regulation, and customer support.

To help point you in the right direction, below we review a couple of top-rated brokers and best investment apps that you to invest in the best oil ETFs UK.

1. eToro – Invest in Oil ETFs with 0% Commission

eToro has grown to new heights in recent years – with more than 20 million people now using this top-rated trading platform. The broker offers a vast library of popular assets – which includes more than 2,400 shares and 250+ ETFs from 17 UK and international markets.

In fact, all of the best commodity ETFs UK that we discussed on this page can be bought and sold at eToro. The process of investing takes minutes – as it’s just a case of opening an account, depositing some funds, and deciding how much you wish to stake on your chosen ETF. In terms of fees – this is where eToro really stands out.

eToro ETFs iShares

67% of retail investor accounts lose money when trading CFDs with this provider.

As we covered earlier, eToro does not charge any trading commissions. This isn’t just the case with ETFs, but stocks, forex, commodities, indices, and cryptocurrencies. There are no ongoing platform fees either, so you can keep hold of your oil ETF for as long as you like. You do, however, need to consider the expense ratio charged by the respective ETF provider. In terms of account minimums, eToro allows you to invest in oil ETFs from just $50 upwards.

This is great, as you don’t need to be over-exposed to this highly volatile asset class. Instead, you can diversify across several oil ETFs or even consider other asset classes entirely. An additional tool available on the eToro platform is the Copy Trading feature. This allows you to copy an eToro trader of your choosing like-for-like. There is also a passive CopyPortfolio that contains a basket of renewable energy stocks – should this be of interest.

oil etfs etoro

In terms of payments, you can deposit funds with your UK debit card, credit card, bank account, or an e-wallet such as Paypal and Skrill. There is a very small currency conversion charge of 0.5% when you deposit funds, as eToro is denominated in US dollars. But, this is countered by the commission-free service that you will benefit from. Safety-wise, eToro is not only regulated by the Financial Conduct Authority (FCA), but you are also covered by the Financial Services Compensation Scheme (FSCS)

Pros:

  • Super user-friendly online trading platform
  • Buy stocks without paying any commission or share dealing charges
  • Trade CFDs in the form of stocks, indices, commodities, forex, and more
  • 2,400+ stocks listed on the London Stock Exchange and 16 international markets
  • Deposit funds with a debit/credit card, e-wallet, or UK bank account
  • Ability to copy the trades of other users
  • FCA and FSCS protections

Cons:

  • Not suitable for advanced traders that like to perform technical analysis

67% of retail investors lose money trading CFDs at this site

 

2. Fineco Bank – Affordable ETF Dealing Platform with ISAs & SIPPs

Fineco logo

If eToro doesn’t quite take your fancy, then another good option to consider is Fineco Bank. Backed by a large-scale Italian financial institution, Fineco is super-popular with retail investors in the UK. This is because the broker allows you to buy assets in a low-cost environment.

In fact, the platform offers a list of 200 ETFs each month that you can invest in commission-free. If, however, your chosen oil ETF isn’t on the commission-free list, you will pay just £3.95 per trade. This is also charged when you cash your ETF investment out. There is also an annual fee of 0.25% charged by Fineco (in addition to the ETF expense ratio).

ETFS FINECO BANK

Although this isn’t as cheap as eToro, Fineco Bank does give you access to a much larger number of oil ETF markets. Fineco Bank is also a good option if you want to diversify into other asset classes. This includes thousands of shares from dozens of stock markets, investment funds, and CFD trading facilities.

In terms of the fundamentals, Fineco Bank is authorized and regulated by the FCA, and your capital is covered by the FSCS. The minimum deposit to get started at this brokerage platform is just £100. There are no fees to deposit or withdraw funds, which is great. However, the only supported payment method is bank wire – meaning no debit/credit cards.

Pros

  • Charges just £2.95 per trade when buying and selling shares
  • £3.95 on US-listed stocks
  • Access to thousands of UK and international shares
  • Deposit funds with a UK bank account
  • Heavily regulated, including an FCA license
  • Suitable for both newbies and seasoned investors
  • Great research and educational department
  • Established way back in 1999
  • All personal data protected

Cons

  • 0.25% annual fee

Your money is at risk.

How to Buy the Best Oil ETFs UK

If you’re ready to invest in your chosen oil ETF from the comfort of your home – we are now going to walk you through the process step-by-step.

The tutorial below is specifically aimed at investing in an oil ETF with eToro – as there are no dealing fees and the minimum trade size is just $50 (about £35 GBP).

Step 1: Open an Account and Upload ID

First, head over to the eToro website. Look out for the ‘Join Now’ button and complete the registration process. This will require some personal information – such as your name, address, etc.

eToro sign up

67% of retail investor accounts lose money when trading CFDs with this provider.

Once you have verified your email address and mobile phone number, you then need to upload a copy of your passport or driver’s license. You also need to supply a recently issued bank account statement or utility bill to prove your home address. The documents will be verified by eToro pretty-much instantly.

Note: You can deposit up to $2,250 (about £1,600) without uploading the above ID documents. You will need to do this before you can make a withdrawal though – so it’s best to quickly complete the process now 

Step 2: Make a Deposit

Once you have registered an account at eToro, you can then proceed to make a deposit. The FCA-regulated broker supports a wide range of payment methods – most of which are credited to your account instantly.

This includes:

  • Debit Card
  • Credit Card
  • E-Wallet (Paypal, Skrill, Neteller)
  • Bank Transfer

Step 3: Search for an Oil ETF

You can now head over to the ‘Trade Markets’ section of the eToro website and find the ETF that you wish to invest in. With that said, if you already know which ETF is of interest – you can search for it.

buy oil etf at eToro

In our example above, we are looking to invest in the SPDR S&P Oil & Gas Exploration & Production ETF.

Step 4: Complete Oil ETF Investment

You should now see an order box like the image below. eToro simply requires you to enter the amount that you wish to invest (in US dollars, $50 minimum).

buy oil etf at eToro

67% of retail investor accounts lose money when trading CFDs with this provider.

Then, click on the ‘Open Trade’ button to complete your commission-free investment!

Step 5: Oil ETF Dividends

If you are investing in an oil ETF that consists of stocks – there is every chance that you will also earn dividends. This is the case with the SPDR S&P Oil & Gas Exploration & Production ETF, which makes a distribution every three months. If and when your ETF provider does make a dividend payment, this is usually reflected in your eToro account the next day.

Best Oil Stocks UK – Conclusion

In summary, oil is a super-volatile asset class that reacts very quickly to wider economic and geopolitical events. This means that unlike traditional assets listed on the FTSE 100 – oil ETFs are not suited for long-term portfolios. They do, however, allow you to gain short-term exposure to this asset class.

If you’re looking to proceed with an oil ETF investment right now, eToro allows you to complete the process without paying any commissions or ongoing platform fees. The minimum oil ETF investment is just $50 and opening an account takes less than 10 minutes!

eToro – Invest in the Best Oil ETFs UK with 0% Commission

67% of retail investor accounts lose money when trading CFDs with this provider.

FAQs

What is the best crude oil ETF?

What is the best oil price ETF?

What is a leveraged oil ETF?

What is an oil ETN?

Where can you buy the best Brent Oil ETFs?

Are oil ETFs suitable for long-term investments?

About Kane Pepi PRO INVESTOR

Kane Pepi is a British researcher and writer that specializes in finance, financial crime, and blockchain technology. Now based in Malta, Kane writes for a number of platforms in the online domain. In particular, Kane is skilled at explaining complex financial subjects in a user-friendly manner. Academically, Kane holds a Bachelor’s Degree in Finance, a Master’s Degree in Financial Crime, and he is currently engaged in a Doctorate Degree researching the money laundering threats of the blockchain economy. Kane is also behind peer-reviewed publications - which includes an in-depth study into the relationship between money laundering and UK bookmakers. You will also find Kane’s material at websites such as MoneyCheck, the Motley Fool, InsideBitcoins, Blockonomi, Learnbonds, and the Malta Association of Compliance Officers.

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