Exchange traded funds tracking energy stocks are rebounding and the enthusiasm is not limited to the most conventional funds in the group. For example, the VanEck Vectors Unconventional Oil & Gas ETF (NYSEArca: FRAK) is sporting a second-quarter gain of almost 18%.

FRAK, which debuted in early 2012, follows the MVIS Global Unconventional Oil & Gas Index. That benchmark “is intended to track the overall performance of companies involved in the exploration, development, extraction, and/or production of unconventional oil and natural gas,” according to VanEck.

A combination of diminished global output and rising global demand have helped reduce the global supply glut that dragged on oil prices for years. Production cuts from the Organization of Petroleum Exporting Countries and their allies have largely contributed to the cut in supply. Meanwhile, expanding economies around the world has bolstered demand for raw materials such as crude oil.

“Since the beginning of 2018, oil prices have continued to march towards $80 a barrel, but energy stocks have lagged behind,” said VanEck in a recent research note. “Our recent research in the space shows that the returns of unconventional oil & gas equities, or exploration and production (E&P) companies, can mostly be explained by the performance of three independent variables: oil, natural gas, and the U.S. stock market. Meanwhile, similar research has shown that oil service equity returns are predominately driven by oil prices and the U.S. stock market.”

Inside FRAK ETF Holdings

FRAK holds 48 stocks, but unlike traditional energy ETFs, this fund is not dominated by the likes of Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX). Those stocks often combined for 35% or more of conventional energy equity index funds. Rather, FRAK does not allocate much more than 8% to any of its holdings. Occidental Petroleum Corp. (NYSE: OXY) and EOG Resources Inc. (NYSE: EOG) combine for just over 16% of FRAK’s roster.

Related: E&P ETFs Still Merritt Consideration

In the recent energy sector rally, oil and gas exploration and production companies have been leading the charge, which does not come as a surprise as this segment was among the worst off during the selling when oil prices plunged. Exploration and production companies were among the worst hit due to their close ties to the upstart hydraulic fracturing or fracking industry that has developed alongside advancements in the shale oil industry.

“The performance variance between E&P companies and the three key independent variables has recently narrowed significantly from widths not seen for nearly a decade. However, oil servicers still appear to be trading at a discount when we compare actual performance of oil servicers with their predicted performance based on oil and U.S. stock market returns,” according to VanEck.

For more news and strategy on the Oil ETF market, visit our Oil category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.