Why Energy ETFs Are Attracting Investors as Crude Oil Surges—A Complete Comparison of Top Plays

With crude futures rallying sharply following an International Energy Agency report projecting a supply deficit through 2024, the energy sector is recapturing investor attention. The IEA’s revised forecast—raising global crude oil demand to 1.3 million barrels per day, up 110,000 bpd from previous guidance—signals extended tailwinds for oil markets. Coupled with a resilient employment landscape and geopolitical pressures in the Red Sea, these dynamics have reignited interest in energy investments. For those seeking to capitalize on oil’s upward trajectory, exchange-traded funds offer an efficient entry point. Here’s how five leading funds stack up across different investment profiles.

Broad-Based Exposure: XLE and VDE Lead the Pack

The Energy Select Sector SPDR Fund (XLE) remains the industry workhorse, commanding $38.4 billion in assets and charging just 0.09% annually. Its portfolio—anchored by Exxon Mobil, Chevron, ConocoPhillips, Schlumberger, and EOG Resources, representing 55% of holdings—provides direct exposure to integrated oil majors and services. The fund yields 3.15%, making it attractive for income-focused investors.

For those seeking deeper diversification, the Vanguard Energy ETF (VDE) holds four times more stock positions while maintaining a competitive 0.10% expense ratio. With $8.6 billion under management, VDE’s similar top-five holdings to XLE (accounting for 50% of assets) deliver multi-cap diversification. Its 3.01% yield makes it a solid alternative for risk-conscious portfolios.

Cost consideration: XLE’s massive scale and minimal fee advantage make it the default for passive investors, while VDE appeals to those wanting broader exposure across mid-cap operators.

Specialized Energy Plays: Timing, Costs, and Trade-offs

The VanEck Oil Services ETF (OIH) narrows focus to 25 leading U.S. oil companies, with 25% invested internationally. Managing $2.2 billion in assets, OIH demands attention for its elevated 0.35% expense ratio—notably higher than competitors. Top holdings include Schlumberger, Halliburton, Baker Hughes, Weatherford International, and Tenaris (50% combined). The 1.27% yield reflects the fund’s specialized positioning.

For exploration and production specialists, the SPDR Oil & Gas Exploration & Production ETF (XOP) takes an equal-weighted approach across 55 stocks, ideal for investors betting on discovery and development upside. At $4.2 billion in assets and 0.35% fees, XOP concentrates exposure differently—top 10 holdings represent just 26.35%, spreading risk more evenly. PBF Energy, Valero Energy, Marathon Petroleum, and HF Sinclair anchor the portfolio. XOP’s 2.24% yield reflects its growth-oriented positioning.

Fee trade-off warning: Both OIH and XOP charge triple XLE’s expense ratio; sustained positions should account for this drag.

Infrastructure and Income Focus: MLPX for Yield Hunters

The Global X MLP Energy & Infrastructure Fund (MLPX) targets a different breed—master limited partnerships and energy infrastructure operators. With $1 billion-plus in assets and a 0.45% fee structure, MLPX allocates up to 24% to MLPs, with remainder in infrastructure plays. Williams Companies, ONEOK, Enbridge, TC Energy, and Cheniere Energy form the top tier (40% of holdings).

The standout feature? A generous 4.94% yield, far exceeding traditional energy funds. However, this concentration risk cuts both ways—the top 10 holdings constitute 66% of assets, making diversification limited. This vehicle suits yield-focused investors with longer time horizons.

The Bottom Line: Matching ETFs to Strategy

Crude oil’s projected supply tightness and demand surge create a rare window for energy exposure. XLE and VDE suit core holdings for their scale and cost efficiency. OIH and XOP cater to tactical traders and specialists willing to pay for concentration. MLPX serves a distinct income mandate but demands comfort with higher concentration risk. As macroeconomic headwinds ease and oil markets tighten, the energy sector’s cyclical recovery could accelerate—making tactical allocation decisions critical today.