Oil prices can finally put 2020 behind them as the commodity hit the negative territory in a pandemic-ridden year. However, oil is off to a solid start in 2021, which can be seen in ETFs like the VanEck Vectors Oil Service ETF (OIH) and the VanEck Vectors Unconventional Oil & Gas ETF (FRAK).
OIH is up 13.54% to start the new year while FRAK is up 12.19%. We can see the recent strength in oil by looking at the Bloomberg Gas Oil Subindex Level, which shows a rise of over 20% in the 3-month chart.
Of course, a big mover for oil will be what OPEC members do for the duration of 2021, but in the meantime, oil prices are feeding into strength for OIH and FRAK. Both funds give investors exposure to oil with the dynamic ability of an ETF wrapper.
OIH seeks to replicate the price and yield performance of the MVIS® US Listed Oil Services 25 Index. The fund normally invests at least 80% of its total assets in securities that comprise the fund’s benchmark index.
The index includes common stocks and depositary receipts of U.S. exchange-listed companies in the oil services segment. Such companies may include small- and medium-capitalization companies and foreign companies that are listed on a U.S. exchange.
OIH is up almost 80% in the past 3 months.
FRAK seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS Global Unconventional Oil and Gas Index, which is intended to track the overall performance of companies involved in the exploration, development, extraction, and/or production of unconventional oil and natural gas. In the past 3 months, FRAK has gained over 50%.
Surprise Production Cut
As mentioned, OPEC will always have a say in which direction oil prices will go. However, it looks like they’re looking to also put 2020 behind them with a recent move from one of its biggest members.
Per a Markets Insider report, “Saudi Arabia announced a surprise oil production cut of an extra 1 million barrels per day throughout February and March, Bloomberg reported. WTI Crude prices jumped to a 10-month high, above $50 per barrel, and oil-related stocks like Marathon Oil and Occidental Petroleum jumped as much as 14% in Tuesday trades.”
“We do that with the purpose of supporting our economy, the economies of our colleagues in OPEC+ countries, to support the industry,” Saudi Energy Minister Prince Abdulaziz bin Salman told reporters on Tuesday, according to Bloomberg.
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