This Oil and Gas Services ETF Is Up 40%, Highlighting Energy Strength

A byproduct of rising oil and gas prices is the strength spilling over into ancillary services that support these commodities. As such, the Invesco Dynamic Oil & Gas Services ETF (PXJ) has risen over 40% so far this year.

Oil and gas services offer investors an alternative to play the strength in the energy sector as costs continue to rise amid inflationary pressures. As such, investors don’t have to play oil and gas directly in order to extract gains from the current strength in the energy sector.

As for PXJ, the fund seeks to track the investment results of the Dynamic Oil Services Intellidex Index. The exchange traded fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index.

The underlying index is composed of common stocks of U.S. companies that assist in the production, processing, and distribution of oil and gas. The fund is up a healthy 40% thus far in 2022.

The fund can serve as an ideal play for short-term traders looking to leverage the seemingly ongoing strength in the energy sector or oil/gas services exclusively. Speaking to that targeted exposure, the S&P Oil & Gas Equipment Select Industry Index is up 37% YTD.

“PXJ is likely too targeted for those with a long-term focus, but can be useful as a tactical overlay or as part of a sector rotation strategy,” an ETF Database analysis pointed out.

PXJ Chart

Rising Prices Not Hurting Demand

Even as the world is increasingly turning to renewable energy sources, rising energy prices are not tamping down demand for oil and gas. A conversion to alternate energy sources may be a long-term horizon play, but in the near-term, oil and gas demand should continue to see strength.

Russia’s invasion of Ukraine only accelerated the need for oil after Western sanctions forced these nations to look to other sources of crude in order to offset the reduced supply from Russia. In the U.S. in particular, the economy appears to be withstanding the oil and gas price hike.

“Record high gasoline pricing has shown no sign of spurring demand destruction with the U.S. economy appearing sufficiently strong to drive a robust kickoff to the heavy driving season in just a couple of weeks,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

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