In the time some of us have been sat in large queues hoping that the gas pumps do not run dry by the time we hit the front, some investors have used it as an opportunity to make a profit.
Since the start of September, oil and energy funds have been soaring as the world has struggled with a global shortage of truck drivers, which has disrupted the supply chain and forced the price of oil and gas higher. Indeed, the Brent Crude oil price has risen from $72.50 per barrel a month ago to $83.16 today.
Brian Dennehy, managing director of Dennehy Weller & Co, said: “This is not new news. The beneficiaries are already emerging and the simplest way to observe this is the winners (momentum) since 1st September.”
The iShares Oil & Gas Exploration & Production UCITS ETF has been the best performer among oil funds, returning 27.9%, but there have been impressive gains for a number of energy portfolios, as the below table highlights.
Source: Dennehy Weller & Co
Dennehy pointed to the iShares Oil & Gas Exploration & Production UCITS ETF as a strong passive option for investors that wanted a cheap way into the sector. It has an ongoing charges figure (OCF) of 0.55%.
The $249m (£183m) fund tracks the S&P Commodity Producers Oil and Gas Exploration & Production Index and has the bulk of its money invested in North America. US and Canadian companies make up more than three quarters of the portfolio.
For an active option, the Schroder ISF Global Energy fund “also fits the bill”, he said. The $411m fund is managed by Mark Lacey and has an OCF of 0.8%. The fund’s top holdings are the UK pair of Royal Dutch Shell and BP and as such it has more in the UK and Europe than the passive counterpart.
For investors that wanted a more targeted option, iShares MSCI Russia is an alternative, while investment trust fans could look at the JPMorgan Russian Securities trust.
However, investing in oil or energy securities, or playing it by buying into a country specific fund such as Russia is extremely risky and investors could lose big if the issues are fixed in the near-future.
“If the currently energy trend persists (shortages, supply chain issues, oil price moving up further) all of these funds should continue to benefit, but if the trend doesn’t persist, their prices will soon fall back and you should apply a stop-loss,” he said.
David Kimberley, an analyst at online broker Freetrade, said that investors able to stomach a bit more risk could also look to buy individual stocks, noting that both UK large caps and American smaller companies were intriguing.
“Buying into the gas boom could be as straightforward as giving yourself some exposure to London-listed blue chips like Glencore or Shell, while smaller US firms, like Antero Midstream or New Fortress Energy, may appeal to others given that those larger companies tend to be more diversified and aren’t focused solely on liquified natural gas,” he said.
Investors may wish to focus on gas rather than oil and energy, to target the root of the current issues, he added.
However, for fund and trust investors, finding one focused solely on companies in the liquified natural gas (LNG) sector is a “little trickier”.
“Having a large exposure to companies dependent on LNG prices is a risky move to take as a result. Putting money into firms or funds that could benefit from this price bump, and continue to deliver solid value beyond it, seems like a better move to make,” he said.
As such he suggested the BlackRock Energy & Resources Income Trust, which also has a large exposure to mining companies and other energy businesses.
“This may be no bad thing, as predicting which commodity price will increase is tough, even if it looks easy in hindsight. Figuring out when they'll come down again is even trickier,” Kimberley said.