Oil Stocks Rally On Anticipation Of Stricter Russian Sanctions: Here's How ETFs Are Reacting

Oil prices are heating up, and so are the stocks of major energy companies.

Shares of Chevron Corporation CVX, Occidental Petroleum OXY, and ConocoPhillips COP were trading in the green at the last check on Friday. The rally follows a Reuters report suggesting the U.S. is preparing its most stringent sanctions yet against Russian oil.

These sanctions, expected to target 180 vessels, major oil companies, and top executives, have already pushed oil prices to $80 per barrel — a level not seen since October 2024.

Traders are responding to the anticipated disruption in global oil supply, and some ETFs with oil and energy exposure stand to reap the benefits.

What This Means For ETFs

The United States Oil Fund USO was trading 3.73% higher as of 12.13 P.M. EST
The Invesco DB Oil Fund DBO rose about 3.84%.
The United States 12 Month Oil Fund USL posted a 2.21% gain.
The Energy Select Sector SPDR Fund XOP, with an expense ratio of 0.09% and a 91.26% exposure to the Oil, Gas & Consumable Fuels make it a good bet for investors of oil-focused ETFs. The portfolio includes Exxon Mobil, Chevron and ConocoPhillips.
Vanguard Energy ETF VDE has an expense ratio of 0.10% and like XOP, Exxon Mobil, Chevron and ConocoPhillips enjoys significant weightage in the fund.

Geopolitics and Market Dynamics

Sanctions on Russia — one of the world's largest oil producers — are expected to tighten supply. Prices are expected to go higher. Ongoing reduction in U.S. crude stockpiles, particularly at the Cushing, Oklahoma hub, as reported by Reuters, adds to the pressure.

While tighter supplies drive prices upward, concerns about demand persist. China’s fuel oil imports are likely to fall early 2025 thanks to a hike in oil import tax from Jan. 1.

Weaker demand from China, one of the biggest crude oil importers, could weigh on prices in the longer term.

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