Top Oil & Gas ETFs in 2025: Prices, Performance & Key Insights

If you're aiming to gain exposure to the oil and gas industry through your investments, sector-specific ETFs offer a cost-efficient and diversified approach. Among the most widely traded oil and gas drilling ETFs are the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), iShares Dow Jones U.S. Oil & Gas Exploration & Production Index Fund (IEO), and Invesco Dynamic Energy Exploration & Production Portfolio (PXE). Let's dive into the details of each fund to understand their structure, performance, and market positioning.

Key Insights

Understanding Oil & Gas ETFs

Oil and gas ETFs provide investors a way to diversify their portfolios by investing in companies across the entire energy sector, including exploration, production, refining, and distribution. These ETFs not only reflect individual company performance but also mirror broader economic and geopolitical trends impacting the energy markets.

Because oil and gas markets can be influenced by political developments and natural events, these ETFs often serve as indicators of macroeconomic health. This makes the following three ETFs especially noteworthy for investors looking to track the energy sector.

SPDR S&P Oil & Gas Exploration & Production ETF (XOP)

Launched on June 19, 2006, XOP carries an expense ratio of 0.35%. As of November 30, 2023, it posted a one-year return of -6.8%, a five-year return of 3.28%, and a ten-year return of -5.02%. The fund manages $3.4 billion in assets as of December 6, 2023, and tracks the S&P Oil & Gas Exploration & Production Select Industry Index.

Top holdings as of December 6, 2023, include:

1. Phillips 66 - 2.98%
2. Chord Energy Corp - 2.81%
3. Southwestern Energy Co. - 2.77%
4. Diamondback Energy Inc. - 2.74%
5. Pioneer Natural Resources Co. - 2.71%

iShares Dow Jones U.S. Oil & Gas Exploration & Production Index Fund (IEO)

Established on May 1, 2006, IEO has a management expense ratio of 0.40%. Its returns as of November 30, 2023, include -3.91% over one year, 45.74% over five years, and 3.63% over ten years. The fund is smaller than XOP, with assets totaling $801 million and tracks the Dow Jones U.S. Select Oil Exploration & Production Index.

Leading holdings include:

1. ConocoPhillips - 19.46%
2. EOG Resources Inc. - 10.25%
3. Marathon Petroleum Corporation - 8.42%
4. Pioneer Natural Resources - 7.61%
5. Phillips 66 - 5.38%

Invesco Dynamic Energy Exploration & Production Portfolio (PXE)

PXE, the smallest among these ETFs, manages $21.5 million as of September 30, 2023. Founded on October 26, 2005, it charges a net expense ratio of 0.60%. Its returns as of November 30, 2023, are -2.57% over one year, 11.21% over five years, and 2.06% over ten years.

This ETF is more volatile compared to broad market indexes like the S&P 500. It tracks the Index Dynamic Energy Exploration & Production Intellidex Index.

Top holdings include:

1. Phillips 66 - 5.62%
2. Valero Energy Corp - 5.22%
3. Marathon Petroleum Corp - 5.10%
4. Devon Energy Corp - 5.03%
5. Diamondback Energy Inc. - 4.98%

Components of Oil and Gas ETFs

Oil and gas ETFs typically comprise companies involved in a range of activities such as exploration, drilling, refining, and distribution, providing investors with diversified exposure to the energy sector.

Impact of Geopolitical Events

Political instability in oil-rich regions, trade disputes, and conflicts can disrupt supply chains and cause oil price volatility. Tariffs or trade restrictions may also influence global energy markets, making oil and gas ETFs sensitive to such geopolitical developments.

Correlation Between Oil Prices and ETF Performance

Since oil prices directly affect the earnings of energy companies, fluctuations in commodity prices significantly impact oil and gas ETFs. Rising oil prices typically enhance profitability for these firms, thereby increasing ETF valuations.

Conclusion

While the oil and gas sector has faced challenges including volatile prices and supply dynamics, ETFs like XOP, IEO, and PXE offer accessible avenues for investors seeking exposure to this vital industry. Understanding the interplay of market forces and geopolitical risks is essential when considering these ETFs for your portfolio.

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