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Oil ETF

A Mean to Energy Security and a Bridge for the Green Transition

Oil Services ETF - Fund Overview

VanEck Oil Services UCITS ETF

  • Exposure to a critical natural resource
  • A necessary mean to preserve energy security and independence
  • Oil ETF with a key role during the ongoing energy transition
  • Proven inflation protection
OIHV

Basis-Ticker

Basis-Ticker

Basis-Ticker: OIHV
ISIN: IE000NXF88S1copy-icon
TER: 35bps
AUM: $22.6 M (as of 19-07-2024)
SFDR Classification: Article 6

Lower risk

Typically lower reward

Higher risk

Typically higher reward
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Risk of Oil ETF: You may lose money up to the total loss of your investment due to Risk of Investing in the Oil Industry, Risk Associated with Fossil Fuels, Regulatory Risk and Concentration Risk as described in the Main Risk Factors, KID and prospectus.

VanEck Oil Services UCITS ETF

The Oil ETF by VanEck invests in companies active in the upstream oil sector. The portfolio comprises 25 US listed players who are classified as oil service providers. The Fund adopts a pure-play approach where included companies need to derive at least 50% of revenues from a set of relevant activities that have been identified. They include the following:

Manufacturing, repair and maintenance of equipment used in oil extraction and transportation. Examples of these include pressure vessels, pipes, compressors, pumps and many more.

Many drilling techniques currently exist, all characterized by different features and specifics. Some companies are specialized in offering state-of-the-art drilling equipment and services and are part of the VanEck Oil ETF.

Services of this kind include energy data management, formation evaluation, geological sciences and many others that help drive efficiencies in resource extraction and management.

Drilling
Technology-Based Services

Why Invest Now in the Oil Sector?

In order to satisfy a worldwide increasing energy demand, fueled by a growing population, an unprecedented mix of energy sources is needed. Moreover, the ongoing shift towards renewable energies and a carbon free economy poses additional challenges: the ambitious goals set by the Paris agreement will determine a major change in the energy sector. In this context traditional fossil fuels, like oil and gas, will help carry out this gradual transition and will play an important role for the years to come. Renewables remain in fact sometimes difficult to access. However, it should be noted that oil and fossil fuels in general are subject to many risks including regulatory ones.

How Could an Allocation to the Oil ETF Benefit an Investment Portfolio?

Natural resources have traditionally offered protection in inflationary times. When widespread price increases occur, oil tends to follow and trade at higher levels. Companies included in the Oil ETF, being strongly correlated with the price evolution of this natural resource, can benefit from this. This is particularly evident over the past two years when an unprecedented inflationary spiral has been accompanied by oil prices strongly on the rise. Naturally, past evolution cannot be an overly reliable indicator for future developments.


Source: VanEck, Bloomberg. The graph shows the evolution of the US CPI YoY (indicator for price changes in the US on a yearly basis. Thus, it is commonly adopted as a measure for inflation) and the price of oil (West Texas Intermediate).

Companies in the Oil ETF have traditionally exhibited a moderately low correlation to the broad stock market. This can help achieve higher diversification, especially useful when broad market declines take place. However, it is important to notice that broad stock market risk remains a concern that should not be overlooked. The following graph displays the correlation coefficient between the upstream oil sector and the stock market, for the past years.


Source: VanEck, Bloomberg.

Upstream oil sector represented by the MarketVector US Listed Oil Services 10% Capped Index, stock market represented by the MSCI World.

Main Risk Factors of an Oil ETF

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An Oil ETF will be sensitive to, and its performance will depend to a greater extent on, the overall condition of oil services companies. The profitability of oil services companies is related to worldwide energy prices, including all sources of energy, and exploration and production spending. The price of energy, the earnings of oil services companies, and the value of such companies’ securities are subject to significant volatility. Oil services companies are also subject to risks of changes in exchange rates and the price of oil and gas, changes in prices for competitive energy services, changes in the global supply of and demand for oil and gas, government regulation, the imposition of import controls, world events, negative perception, depletion of resources and general economic conditions, development of alternative energy sources, energy conservation efforts, technological developments and labor relations, as well as market, economic, social and political risks of the countries where oil services companies are located or do business. Oil services companies operate in a highly competitive and cyclical industry, with intense price competition.

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Performance of the companies involved in the fossil fuels sector may be affected by a number of factors, including changes in commodity prices, supply and demand for fossil fuel products or services and exploration, equipment, services and production costs. Many regions that produce fossil fuel, or in which pipes for transporting fossil fuel are located, are politically volatile and conflicts in these regions could result in spikes in fossil fuel prices. In addition, companies in the fossil fuel sector may have significant operations in areas at risk of natural disasters (including physical changes as a result of climate change), social unrest, major terrorist attacks and environmental damage all of which could also increase market volatility. These companies may also be at risk of disbursing the costs of cleaning up accidents, civil liabilities, taxes, governmental regulation on privatization, pricing and supply and other intervention, as well as other social and governance factors.

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Changes to the existing regulation or the development of new rules might negatively impact the value of an investment in the oil industry. Moreover, the ongoing transition towards renewable energy sources might accelerate a shift in the regulatory environment, thus affecting companies involved with oil and fossil fuels. This is a factor to consider before investing in an Oil ETF.

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The Fund’s assets may be concentrated in a particular sector or sectors or industry or group of industries to the extent the Index concentrates in a particular sector or sectors or industry or group of industries. Accordingly, an Oil ETF may be subject to the risk that economic, political or other conditions that have a negative effect on a particular industry or sector will negatively impact the Fund to a greater extent than if the Fund’s assets were invested in a wider variety of sectors or industries.

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