5 ETFs Leading the Charge in Energy’s Remarkable Comeback

New York: The energy sector is bouncing back strong in early 2025. After lagging for a couple of years, it’s now leading the pack. The Energy Select Sector SPDR Fund (XLE) has jumped 6.5%, while the broader market index fund (SPY) has dipped by 0.7%.

Several energy ETFs are on fire right now. The Invesco S&P 500 Equal Weight Energy ETF (RSPG), iShares U.S. Oil & Gas Exploration & Production ETF (IEO), First Trust Natural Gas ETF (FCG), Invesco Energy Exploration & Production ETF (PXE), and SPDR S&P Oil & Gas Exploration & Production ETF (XOP) have all seen gains of nearly 8% recently.

What’s driving this rebound? Well, a mix of colder weather, dwindling U.S. stockpiles, and new sanctions on Russia’s oil sector are all playing a part.

Cold weather is hitting many U.S. states and European cities, which is ramping up the demand for heating oil. This spike in demand is pushing oil and gas prices higher.

On top of that, crude inventories are on the decline. The latest report from the Energy Information Administration (EIA) shows that domestic crude oil stocks have dropped for the seventh consecutive week, marking the longest streak since July 2021.

Then there are the sanctions. The U.S. has rolled out some serious sanctions against Russian oil producers and tankers, targeting major exporters like Gazprom Neft and Surgutneftegas. This move is aimed at cutting off funds for Russia’s war in Ukraine and is likely to disrupt oil supplies to big buyers like China and India.

Interestingly, Russia is the second-largest oil exporter globally, just behind Saudi Arabia.

Another factor is the current market condition known as backwardation, where later-dated contracts are cheaper than near-term ones. This indicates tight supply and strong demand, which is a bullish sign for oil prices.

Speculators are also getting in on the action, increasing their bullish bets on Brent crude oil to a six-month high. Hedge funds have seen their biggest weekly boost in lots since October.

Let’s take a closer look at some of these ETFs.

The Invesco S&P 500 Equal Weight Energy ETF (RSPG) gives equal-weight exposure to energy stocks in the S&P 500. It holds 23 stocks and has about $549.4 million in assets, charging 40 basis points in fees.

The iShares U.S. Oil & Gas Exploration & Production ETF (IEO) focuses on U.S. companies involved in oil and gas exploration and production. It tracks the Dow Jones U.S. Select Oil Exploration & Production Index and has around $605.9 million in assets.

The First Trust Natural Gas ETF (FCG) targets companies that get a significant portion of their revenue from natural gas. It holds 42 stocks and has about $445.2 million in assets, with a good trading volume.

The Invesco Energy Exploration & Production ETF (PXE) evaluates companies based on various investment criteria and holds 32 stocks. It has $107.7 million in assets and charges 63 basis points in fees.

Lastly, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) tracks 53 oil and gas exploration and production companies. It has a whopping $2.4 billion in assets and charges 35 basis points in fees.

So, if you’re looking to dive into the energy sector, these ETFs are definitely worth considering!