After see-saw trading in past few months, oil prices and oil stocks jumped following an attack on the heart of Saudi Arabia’s oil production facilities in Abqaiq and Khurais. Notably, U.S. crude spiked as much 15.5% to more than $63 per barrel in early morning trade today, the biggest intra-day percentage gain since Jun 22, 1998. Meanwhile, Brent soared as much as 19.5% to nearly $72 per barrel, the biggest intra-day jump since Jan 14, 1991.
The attack is the single-worst, sudden disruption of oil supplies ever and is the biggest hit on Saudi oil infrastructure since 1990, when Iraq’s military fired Scud missiles into the kingdom. It also exceeds the loss of Iranian oil output in 1979 during the Islamic Revolution, according to data from the U.S. Department of Energy.
The current disaster halted nearly half of Saudi’s oil production and 5% of the global daily output, threatening global supply (read: ETFs to Win as Saudi’s New Minister May Seek Same Oil Policy).
Saudi Arabia could restart a significant volume of the halted oil production within days, but it needs weeks to restore full output capacity. Many market participants expect the Saudi outage to lead to anxiety over the stability of the world’s oil reserves.
Goldman Sachs expects crude prices to rise at least in the near-term. According to the firm, if the outage lasts no more than a week, it could boost oil prices by $3-$5 per barrel. If Saudi oil remains offline for two to five weeks, oil prices could jump by as much as $14 per barrel. If the disruption lasts any longer, oil prices could easily exceed $75.
Amid the current rally of oil prices and oil stocks, along with a near-term bullish backdrop, energy ETFs are poised to outperform in the days ahead, Below we profile some ETFs that could gain the most from the Saudi Arabia attack and the resultant supply threat.
Though these ETFs might have unfavorable Zacks Rank #4 (Sell) or 5 (Strong Sell), these have the momentum to move higher on the news given their outperformance over the past month (read: 5 Top-Performing Energy ETFs Over the Past Week).
Oil ETF: VanEck Vectors Oil Services ETF (NYSE: OIH)
This fund tracks the MVIS U.S. Listed Oil Services 25 Index, which offers exposure to the companies involved in oil services to the upstream oil sector, including oil equipment, oil services and oil drilling.
Zacks Rank: #5
AUM: $632 million
Expense Ratio: 0.35%
1-Month Return: 15.1%
Oil ETF: SPDR S&P Oil & Gas Equipment & Services ETF (NYSE: XES)
This fund tracks the S&P Oil & Gas Equipment & Services Select Industry Index, which measures the performance of the companies engaged in the oil and gas equipment and services industry.
Zacks Rank: #5
AUM: $147.6 million
Expense Ratio: 0.35%
1-Month Return: 14.1%
Oil ETF: iShares U.S. Oil Equipment & Services ETF (NYSE: IEZ)
This ETF offers exposure to U.S. companies that provide equipment and services for oil exploration and extraction by tracking the Dow Jones U.S. Select Oil Equipment & Services Index.
Zacks Rank: #5
AUM: $94 million
Expense Ratio: 0.42%
1-Month Return: 13.6%
Oil ETF: Invesco Dynamic Oil & Gas Services ETF (NYSE: PXJ)
This product follows the Dynamic Oil Services Intellidex Index, which thoroughly evaluates companies based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value (see: all the Energy ETFs here).
Zacks Rank: #5
AUM: $13.1 million
Expense Ratio: 0.63%
1-Month Return Return: 13.3%
Oil ETF: Invesco Dynamic Energy Exploration & Production ETF (NYSE: PXE)
This product follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value.
Zacks Rank: #4
AUM: $30.6 million
Expense Ratio: 0.65%
1-Month Return Return: 10.8%
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VanEck Vectors Oil Services ETF (OIH): ETF Research Reports
iShares U.S. Oil Equipment & Services ETF (IEZ): ETF Research Reports
SPDR S&P Oil & Gas Equipment & Services ETF (XES): ETF Research Reports
Invesco Dynamic Energy Exploration & Production ETF (PXE): ETF Research Reports
Invesco Dynamic Oil & Gas Services ETF (PXJ): ETF Research Reports
