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Oil Funds Could See Record Gains In December

The battered oil and gas sector ran riot on Monday, with the sector’s popular benchmark Energy Select Sector Fund (XLE) jumping nearly 15%.

The catalyst was news that Pfizer and BioNTech may have hit the jackpot with a Covid-19 vaccine–a development that has injected a heavy dose of optimism into global financial markets.

The pharmaceutical giants announced they have developed BNT162, an mRNA vaccine that has been more than 90% effective in preventing Covid-19 infection in nearly 44,000 test subjects.

Now, ETFs are reaping the rewards of optimism with major new inflows.

DataTrek Research co-founder Nick Colas has told CNBC’s “ETF Edge” that energy and banking ETFs could see record inflows in December as mutual funds rotate out of other less favored sectors.

For instance, the S&P Oil & Gas Exploration & Production ETF (XOP) has gained 16.2% since Monday, compared to a 0.35% decline by the Consumer Discretionary Select Sector Fund (XLY).

The ETF space has been enjoying a banner year, with inflows remaining on track to surpass the previous record of $476 billion set three years ago.

Here are some leading oil ETFs to play this trend:

YTD Returns: -43.2% With more than $10 billion in AUM, Energy Select Sector SPDR ETF (NYSEARCA:XLE) is the largest dedicated energy fund. Not surprisingly, it’s also the most liquid and boasts a low expense ratio of just 0.13%, making it one of the cheapest oil ETFs to own.

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