7 Best Oil ETF Canada Reviews 2024 | Are They a Good Investment Opportunity?

January 22, 2024 | Editorial Team

The energy sector has had its ups and downs in recent years. The prices have gone down drastically over the recent years. This is a downfall to the energy industry. But, have you yet given a thought about the investor’s side. Well, a downfall in oil prices is a perfect opportunity for investors or brokerages to invest in oil ETF Canada.

Investing in the oil sector in times when the prices have dropped is a good idea. However, you risk losing your funds if the prices fall further without recovering. Then, are there ways you can invest in oil or energy ETFs with minimal risk? The simple answer is oil ETF Canada.

In this article, we shall guide you to the best oil ETFs in Canada, including how to choose them.

Our recommendation:

What Are Canadian Oil ETFs?

ETFs are a trading strategy that allows investors to invest in the stock market without involving individual stocks. The Canadian oil ETFs are the exchange-traded funds that provide a chance to investors to invest in oil futures without necessarily buying oil (see also ETF funds vs Index funds).

Investing in the Canadian oil ETFs is, however, not as easy as it may sound. The transactions need a certain level of expertise. It is a complicated task that requires a certain level of expertise. The Canadian oil ETF is ideal for experienced traders rather than starters, but you can always seek help from, robo-advisors, digital platforms that provide automated, algorithm-driven investment services.

Those who won’t like to invest in the oil ETF can invest in oil-producing companies. The oil companies have a tendency to leverage to respond to the oil prices. When the prices go up, the company’s valuation also goes up drastically. This has a direct impact on the shares of the company.

Some ETFs have unlimited options of oil futures. This gives investors a chance to utilize future contracts, even if the transaction is complex.

Did you know that ETFs can also be traded in oil company groups? This means that you won’t have to analyze or keep track of a company’s individual stocks. You also benefit from spreading your risk to several companies. This is where the best Canadian ETFs come in.

Why You Need to Invest in Oil ETF Canada

stock graph and oil platforms silhouettes

When oil prices are down; it’s the hope and expectation of every investor and the energy sector that the prices will go up soon (check out other top ETF sectors, too).

Those trading in oil buys oil directly. You, as an investor, can do the same or can decide to invest in oil futures. However, you need to be warned in advance that this type of trading is challenging. You should leave it to the experts. You’ll be delighted to learn that there are ETFs with oil futures. This is a better option as trading is easy.

Instead of trading directly in oil, you can trade in shares of oil-producing firms. The debts associated with oil companies force them to leverage to respond to the change in the oil price. A rise in the oil price will increase the stock prices.

Do not invest in oil company stocks unless you are an advanced trader or have the required level of expertise. You need to invest in an oil ETF invested in an oil company for this kind of investor.

What Are the Best Canadian Oil ETFs?

Investing in the Canadian Oil ETFs provides you with two options to choose from. You can trade in ETFs investing in oil futures or ETFs investing in oil stocks. ETFs investing in oil stocks include Horizons BetaPro, Horizons Canadian Midstream Oil & Gas Index ETF, BMO S&P, and iShares S&P/TSX Capped Energy Index ETF. ETFs investing in oil futures include Horizons BetaPro NYMEX Crude Oil Bull Plus ETF, Horizons NYMEX Crude Oil ETF, Auspice Canadian Crude Oil Index ETF, and United States Oil Fund.

Let’s take a look at some of the best Canadian oil ETFs. In addition, take a look at our best ETFs review).

green stock chart and oil barrel

ETFs Investing in Oil Stocks

1. Bmo S&P/TSX Equal Weight Oil & Gas ETF 

This is a Bank of Montreal-based ETF. It incorporates refining, drilling, production, storage, exploration, marketing, transportation, and oil line services companies. This oil and gas industry presumes the performance of the Solactive company, including expenses and oil and gas companies index.

Bmo S&P/TSX Equal Weight Oil & Gas ETF is associated with the Imperial oil company, Suncor, Canadian oil sands company, and Encana company.

This is the ideal investment you should consider if you want a wider diversification to spread your risk.

This Canadian oil ETF has $105.74 million managed assets and a management expense ratio of 0.61%. Its Bid/Ask spread is 0.19%, and the total cost is 0.81%.

2. Horizons S&P/TSX Capped Energy Index ETF

This ETF clones the S&P/TSX Capped Energy Index performance, including gross expenses and returns. Banks pay this ETF in cash on their index return upon a fee payment. Thus, the ETF doesn’t hold the index securities on its own.

You will not receive your taxable distributions directly when you invest in this ETF. Instead, you will get the sum return of the index.

The management expense ratio of this ETF is 0.39, and its total assets are $28.90 million. The ETF has a 0.27% bid/ask spread, and the total cost is o.66%.

3. BlackRock IShares S&P/TSX Capped Energy Index ETF

This is the ideal investment if you’re aiming a long-term capital growth. This ETF trades in the Canadian energy sector, mainly in equity securities (see also Canadian bank ETFs).

This ETF has a major part of its assets in the Suncor Energy company and the Canadian Natural Resources and Suncor Energy. They account for about half of the assets, thereby reducing diversity.

This ETF has a management expense ratio of 0.61%. Its total assets are $761.26 million, and the dividend yield is 3.86%.

4. BMO Junior Oil Index ETF

This Canadian oil stock ETF has higher returns on investment despite its higher risks. It is sensitive in price exploration in production companies.

You will have massive gains on its peaks, but you may concede huge losses at its bad times. The management expense ratio of this ETF is 0.63%. Its total assets are $56.4 million, and the dividend yield is 0.82%.

ETFs Investing In Oil Futures

5. Horizons BetaPro Crude Oil Leveraged Daily Bull ETF

This focuses on the daily performance and aims to double the everyday performance of the futures index. This is the ideal ETF to invest in if you’re looking for higher returns within a short period. However, it has a higher risk than other Canadian oil ETFs.

This ETF replicates the executions of the Horizons Crude Oil Rolling Futures Index of a Horizons Crude Oil owned by an individual aiming to disclose the forthcoming month(s) contracts. Its performance is determined daily. It’s, therefore, ideal for a short-term investment rather than a long-term investment. Despite the oil prices having the potential to increase in the future, this ETF is not ideal for long-term investment.

This ETF has a management expense ratio of 1.30%, and its total assets are %75.75 million.

6. Horizons NYMEX Crude Oil ETF 

The Horizons NYMEX Crude Oil ETF uses Canadian banks forward agreements to invest in NYMEX light sweet crude oil futures contracts. This ensures the ETF a return on their December futures contract for a cash payment. 

This ETF exposes the currency in Canadian dollars despite the crude oil futures trading in United States dollars. It has a competitive price because it isn’t passively managed.

The ETF has a 0.88% management asset ratio and a year-to-date return of 53.24%.

7. Horizons Crude Oil ETF

This Canadian oil stock uses Canadian banks forward agreements to invest in Solactive Light Sweet Crude Oil Winter MD Rolling Futures. You will be exposed to index performance given that they are bullish on oil.

You will gain access to the ETFs prices every year on contracts based on the winter months. The ETF seeks to do away with the monthly futures contract with a risk of yielding negative gains. Investing in Horizons Crude Oil ETF gives you a chance to invest in December contracts of every year and access the price exposure in June of every year.

The management asset ratio of Horizons Crude Oil ETF is 0.88%, and the total assets it manages are $47.43 million.

The Bottom Line

As seen, investing in the energy sector, especially oil, is a challenging adventure that needs expertise. The Canadian oil ETFs is the ideal investment strategy for the regular investor. The ETFs lowers the risk by diversifying your capital investment.

An ETF with a passive management strategy is the most affordable investment when investing in oil stocks or oil futures. An example of ETFs with passive management index is BMO S&P/TSX Equal Weight Oil & Gas ETF.

ETFs with direct contact with their oil stocks are easier to understand and invest in than those using derivatives. This should be your ideal consideration if you want an effortless transaction.

Preferences may vary, but you need to consider these factors if you look forward to investing in Canadian Oil ETFs.