What does MM think is the best way (s) to gain exposure to oil?

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Question asked 02/12/2022

What does MM think is the best way (s) to gain exposure to oil?

Hi James, Thanks for your and all the teams good work, I most value your comments and insights around what drives company price share movements and the markets general sentiment. If I were looking to gain exposure to the Oil price as a commodity in AUD (currency hedged) and listed on the ASX, what would be your view on this trade? I’ve researched Oil ETFs although they do not appear to correlate and or underperform to the oil price index, what would you suggest. Also would you make comment on the coal price and forecast with Peter O’Conner during your interview this week. Kind Regards, Brendan.

Answer

Hi Brendan,

3 things pop to mind:

The ETF to consider is the BetaShares Crude Oil ETF (OOO) which owns oil futures and is currency hedged. This ETF did get into trouble when Oil briefly traded in negative territory as they held front month contracts meaning they were forced sellers into a market that was being artificially depressed given financial players (like ETF providers) can’t take delivery of the physical. In any case, I believe they have changed the composition of the ETF to avoid this in the future – it will detail this in the PDS.

If your not happy with the correlation / respective performance of ETF’s I think we would be inclined to buy a basket of Australian oil (& gas) stocks i.e. Woodside Group (WDS), Santos (STO) and Beach Petroleum (BPT).

Thirdly, in terms of ETF’s we do still like the BetaShares Global Energy ETF (FUEL) which has looked after us in the past, its currency hedged with main holdings currently of Exxon Mobil, Chevron, while the most dominant regions are currently 58% allocation to US names and 13% to the UK.

As for coal we like it both into Q1 of 2023 and medium term – see the Resource Review Webinar Here

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Fuel

LAST UPDATED 02/12/2022 15:40

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