Crude oil prices - stuck in a relatively tight range in the
first half of the year - have bounced back sharply to the
triple-digit mark in the second half. The price surge was backed by
seasonality and some other key factors.
First, higher oil demand is a seasonal summer trend not only in
developed nations but also in emerging economies. Second, the
political unrest in the Middle East could boost uncertainty and
increase the likelihood of a supply disruption. Third, encouraging
labor and retail sales data, signaling a strong U.S. economy, have
added to the bullishness (read:
Venezuela: The Next Black Swan for Oil ETFs?
Further, the price rise was fueled by the latest data from the U.S.
Energy Information Administration, while many foreign nations are
also rebounding. China has seen solid data as of late, while
European nations are also seeing decent GDP figures too.
The strength is not limited to the commodity world as a number of
oil producers are also moving higher. These firms are expected to
outperform as long as the commodity surges.
Key oil producing countries are also benefiting from this uptrend,
as the commodity is an important driver of their overall economies.
After all, oil revenues make up a big chunk of either tax revenues
or GDP growth opportunities (and sometimes both) in big oil
We have seen this phenomenon take place in a number of countries
over the past few years, and with the advent of ETFs, these nations
are easier to play than ever. In light of this, we have highlighted
three country ETFs that could enjoy smooth trading in the months
ahead should oil price rise or remain above $100 per barrel.
This trio of nations could be an interesting pick for investors who
believe that oil will continue to move upward, and finally lead the
commodity world higher (read:
Crude Oil ETF Investing 101
iShares MSCI Canada ETF (
Canada has been a commodity-rich nation as it is the world's sixth
largest producer of crude oil and a net exporter of the commodity.
Higher oil price stimulates production, investment, consumer
spending and employment in the country and thus aids economic
The best way to invest in Canada is the iShares MSCI Canada ETF, a
product that has nearly $3.6 billion in assets. The fund tracks the
MSCI Canada Index, holding just under 100 stocks in its basket.
Although financials take the top spot at 36.63%, energy makes up a
huge chunk of assets accounting for over one-fifths of the total.
In terms of holdings, Royal Bank of Canada, Toronto-Dominion Bank
and Bank of Nova Scotia occupy the top three positions with a
combined share of 19% (see more in the
Global X FTSE Colombia 20 ETF (
Colombia might not be a prominent name among the global oil
producers, but it is actually the fourth largest oil producer in
Latin America after Venezuela, Mexico and Brazil. The country is
enjoying a huge oil boom, primarily due to critical reforms in its
oil sector. Crude production has almost doubled since 2006.
The most popular way to play the country is with GXG, an ETF from
Global X. The product tracks the FTSE Colombia 20 Index, holding 24
Colombian companies. The ETF has so far managed assets worth $148.6
million while charging investors 68 basis points a year in fees
Time to Buy This Top Ranked ETF?
The ETF is heavily concentrated in energy stocks, as these make up
nearly 22% of the portfolio. In fact, Colombian oil giant Ecopetrol
accounts for 14% of assets alone, suggesting pretty heavy
iShares MSCI UK Index Fund (
The United Kingdom is the largest producer of oil in the European
Union with over 3 billion barrels of proven crude oil reserves. Oil
remains the primary driver of energy consumption in the country,
accounting for 38% of the total.
The most popular way to target the British economy is with iShares
EWU. The fund tracks the MSCI United Kingdom Index and holds 108
stocks in its basket. The product is rich as it has accumulated
over $2.3 billion in AUM while charges 50 bps in fees and expenses
Are UK ETFs in Serious Trouble?
Financials actually take the top spot in the ETF, making up about
22% of the holdings, although energy accounts for 17% as well. The
two oil giants - BP Plc and Royal Dutch Shell - take the third and
fourth positions, respectively, in the basket.
Commodity-dependent countries could be worthwhile when natural
resource prices are rising. This is especially true when the dollar
is showing some weakness and investors are again gaining confidence
in the broad commodity world.
Rising oil prices would improve the economic health of the
oil-dependent nations and in turn ensure profits for investors
picking these three products. All the three products currently
carry a Zacks ETF Rank of 3 or 'Hold' rating, but if oil continues
to move higher we could see some outperformance for these economies
in the near future.
Want the latest recommendations from Zacks Investment Research?
Today, you can download
7 Best Stocks for the Next 30 Days
Click to get this free report >>
ISHARS-CANADA (EWC): ETF Research Reports
ISHARS-UTD KING (EWU): ETF Research Reports
GLBL-X/F COL 20 (GXG): ETF Research Reports
To read this article on Zacks.com click here.
Want the latest recommendations from Zacks
Investment Research? Today, you can download 7 Best Stocks for the
Next 30 Days. Click to get this free report