Before you decide to get into the energy sector, look at the fundamentals and not this recent run. In oil’s favor is that refining capacity is strained, there are supply disruptions, the dollar is weakening and speculators will push the price higher. On the other hand, demand for petroleum products fell 8.5% in February from January, while gas demand fell 6.2%.
And above all, always be sure to have your exit strategy in place if one of those big corrections occur.
Some ETFs that grant access to energy are:
- United States Oil (USO): up 23.3% year-to-date
- United States Gasoline (UGA): up 13.5% year-to-date
- iShares Dow Jones U.S. Energy Sector Index Fund (IYE): up 3.4% year-to-date
- Rydex S&P Equal Weight Energy (RYE): up 4.9% year-to-date
Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.