Comprehensive Guide to Crude Oil ETF Investment: How to Choose and Trade Crude Oil ETFs?

Why Have Crude Oil ETFs Become Investors’ New Favorite?

As the most active commodity trading product globally, crude oil plays a vital role in international markets. Traditional crude oil investment methods include futures, funds, stocks, and other channels. However, in recent years, crude oil ETFs have gradually become the preferred tool for retail and institutional investors due to their flexibility and ease of operation.

Crude oil ETFs do not require investors to hold physical crude oil directly. Instead, they track crude oil futures prices or specific indices indirectly by allocating crude oil futures contracts, forward contracts, or swap products. This design allows ordinary investors to participate conveniently in the crude oil market. Since ETFs are listed and traded on exchanges, buying and selling are no different from trading stocks, significantly lowering the participation threshold.

It is worth noting that the emergence of inverse ETFs and leveraged ETFs has diversified investment strategies. Investors can achieve 2-3 times long or short positions, with 2x leveraged products being the most mainstream. The US market leads in the scale of these innovative products.

Deep Benchmarking of Mainstream Crude Oil ETF Products

Crude Oil ETFs in the US Stock Market

Global XMLP and Energy Infrastructure ETF (MLPX)

Issued by Global X, tracking the Solactive MLP and Energy Infrastructure Index, focusing on midstream oil and natural gas companies. Core holdings include TC Energy Corp. (TRP), Enbridge Inc. (ENB), and Williams Companies (WMB). Management fee is 0.45%, with an annual dividend yield of 10.1%. Assets under management amount to $506 million, latest price is $62.55.

iShares Global Energy ETF (IXC)

A product under iShares, focusing on large global energy companies. Major components include ExxonMobil (XOM), Chevron (CVX), and Total (TOT). Management fee is 0.46%, with an annual dividend yield of 11.88%. Assets under management are $690.8 million, latest price is $41.13.

Energy Select Sector SPDR Fund (XLE)

Launched by State Street’s SPDR, composed entirely of US energy companies, tracking large integrated oil and gas firms globally. Top holdings include Chevron, ExxonMobil, and ConocoPhillips (COP). Known for a very low management fee of 0.13%, with an annual dividend yield of 15.57%. Largest assets under management reach $8.3313 billion, latest price is $88.10.

Crude Oil ETFs in the Asia-Pacific Region

Samsung Crude Oil Futures ETF (03175.HK)

A professional crude oil investment tool in Hong Kong, issued by Samsung Asset Management, tracking the S&P Goldman Sachs Crude Oil Multi-Month Futures Contract Index. Gains are obtained through WTI crude oil futures allocation. Management fee is 0.65%, custody fee ranges from 0.10% to 0.15%, latest price is HKD 7.06.

Southern East Asia WTI Crude Oil Futures ETF (HK0000891355)

Launched by Southern East Asia Asset Management, directly tracking WTI crude oil futures. Management fee is 0.99%, custody fee is 0.10%, latest price is HKD 6.89, providing a convenient way to invest in West Texas Light Sweet Crude Oil.

Yuan Da S&P Oil ETF (00642U)

The only crude oil investment product in Taiwan, issued by Yuanta Investment Trust, tracking the S&P Goldman Sachs Crude Oil ER Index. The fund has a high correlation of 0.923 with spot crude oil prices, management fee is 1.00%, custody fee is 0.15%, latest price is $17.68.

iShares MSCI Taiwan Index ETF (EWT)

A product under BlackRock’s iShares, tracking the MSCI Taiwan Index, covering the top 85% of listed companies in Taiwan. Total management fee is 0.62%, latest price is $55.85.

SPDR S&P/ASX 200 Resources Fund (OZR)

A resource sector investment tool in Australia, managed by State Street Global Advisors, tracking the ASX 200 Resources Index. Indirectly participates in crude oil fluctuations through allocation to oil and mineral resource-related companies. Management fee is 0.50%, latest price is AUD 12.08.

BMO S&P/TSX CAPP Oil & Gas Index ETF (ZEO)

A Canadian oil and gas industry fund issued by BMO Global Asset Management, tracking the performance of Canadian oil and gas companies. Includes multiple oil and gas exploration and production firms. Management fee is 0.60%, latest price is CAD 76.79.

Comparison of Investment Methods Beyond Crude Oil ETFs

Crude Oil Futures — The Most Liquid but Highest Threshold

Crude oil futures are the most traded commodity derivatives, with WTI and Brent being the most active. Other varieties include high-sulfur crude and Dubai Sour (SGX). Due to large contract sizes (e.g., standard crude futures are 1,000 barrels), they require significant capital and are not suitable for small and medium investors.

Crude Oil Stocks — In-Depth Research and Stock Risks

Besides investing via funds, investors can directly buy stocks of crude oil companies. This requires tracking global oil prices and conducting in-depth research on the target company’s production potential, financial performance, and competitive position. Major players include Sinopec, ExxonMobil, Royal Dutch Shell, BP, and Total.

Crude Oil Options — Insurance-like Risk Hedging

Options trading is similar to futures but adds a choice. When the price movement is contrary to expectations, investors can choose not to exercise the contract, losing only the premium. For example, with a $30/barrel crude oil call option with a $40 strike in June and a premium of $0.1, if the June oil price reaches $45, exercising the option yields a profit of $4,900; otherwise, the loss is the premium paid ($100).

Crude Oil CFDs — Flexible Leverage Trading

Contracts for Difference (CFDs) allow traders to use margin for leveraged trading without actually purchasing crude oil. If the platform offers a 5% margin, an investor only needs to pay 5% of a $1,000 position ($50) to open a trade. CFD trading usually involves no commission, profits from the spread, and can start from as low as 10 barrels.

Why Choose Crude Oil ETFs? Five Core Advantages

Traded on Securities Exchanges, Most Convenient to Operate

Crude oil ETFs are listed on stock exchanges, traded like stocks, with no need to open futures accounts, simplifying procedures.

High Liquidity and Intraday Trading Opportunities

Compared to stocks, crude oil ETFs have better liquidity, support frequent intraday trading, allowing investors to capture short-term fluctuations flexibly and diversify single-stock risks effectively.

Tax Benefits

Capital gains tax is only incurred upon sale, offering greater tax advantages compared to other fund formats.

Significantly Lower Costs Than Other Methods

Crude oil ETFs typically have management fees between 0.3%-0.4%, saving on custody, storage, and insurance costs associated with physical crude oil. On average, they can save 2%-3% compared to futures and stock investments.

Two-Way Trading Flexibility

Investors can go long to capture upward trends or use inverse ETFs to hedge risks. Combining with stop-loss and take-profit tools helps better manage positions.

Hidden Risks of Investing in Crude Oil ETFs

Unpredictable Price Fluctuations

Global political events, geopolitical conflicts, and environmental policies can cause sudden shocks in the crude oil market. The occurrence of negative oil prices in history exemplifies extreme market volatility.

Futures Market Far More Active Than ETFs

In terms of trading volume and participation, the futures market vastly exceeds ETFs, making it more attractive to institutional investors and oil-related enterprises seeking large asset allocations.

High Knowledge Requirements for Investors

Beginner investors unfamiliar with crude oil contract fundamentals face significantly increased risks. Some ETFs track small and medium-sized US shale companies, which tend to be less competitive and may face bankruptcy in low oil price environments.

Cost of Roll-Over Erodes Long-Term Returns

ETFs tracking crude oil futures need to bear high roll-over costs when contracts are rolled over, making long-term holding less cost-effective and gradually eroding capital.

Practical Strategies for Investing in Crude Oil ETFs

Build Diversified ETF Portfolios to Reduce Risks

Leverage the flexibility of crude oil ETFs to construct multi-layered investment portfolios. To stabilize crude oil exposure, sell some ETFs to hedge downside risk; if holding multiple oil stocks, sell oil ETFs to avoid systemic risks.

Use Inverse ETFs for Short-Hedging

For investors unable to short via margin accounts, inverse ETFs offer a convenient way to profit from falling oil prices. However, inverse ETFs carry high risks; a rebound in oil prices can lead to substantial losses. Investors must carefully assess their risk tolerance before engaging.

When investing in crude oil ETFs, prioritize large-scale, institutional-grade products. These funds typically have more professional research teams, better insights into oil market trends, and offer greater capital security.