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VanEck launches new ETF on the oil sector

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Asset manager VanEck has listed the VanEck Oil Services UCITS ETF on the London Stock Exchange and Deutsche Börse Xetra. The firm writes that this new ETF allows investment in the largest US-listed companies in the oil services sector.

“With geopolitical tensions dominating the headlines since 2022, oil & gas supply has once again become an issue of critical importance to most countries around the world. As part of the conflict between Russia and Ukraine, for example, energy supplies were used as political leverage,” explains Martijn Rozemuller, CEO at VanEck Europe. “As a result, fossil fuels have become a matter of national security in many countries, and the importance of the security of energy supply and independence has become apparent. Due to higher commodity prices and supply shortages, investments in fossil fuels are making a comeback. Several countries have reconsidered their energy mix, placing increased emphasis back on traditional fossil fuels.”

The firm writes that it is true that the goals of the Paris Agreement will bring about a fundamental change in the energy sector. Traditional fossil fuels such as petroleum and gas, however, can help manage the gradual transition to a net-zero economy in this context. 

“Renewable energy sources are in some cases still comparatively difficult to access. Moreover, fossil fuels will potentially be able to compensate and support the electricity grid in those instances when renewable energy cannot be generated, increasing in this way capacity. Solar energy, wind power and hydrogen currently account for about 5 per cent of total energy consumption, while petroleum accounts for about 30 per cent,” Rozemuller says.

The VanEck Oil Services UCITS ETF gives investors access to this industry sector, the firm writes, saying that due to their low correlation with the broad equity market and a high correlation with oil price developments, shares of companies from the oil sector offer a good opportunity for portfolio diversification. With a pure-play approach, the ETF aims in the future to invest in companies that generate the majority of their sales in the oil & gas extraction sector or provide equipment or services for this purpose.

To this end, the ETF follows the MarketVector US Listed Oil Services 10% Capped Index, which tracks the 25 largest and most liquid companies from this economic sector listed in the US. Using this index, the shares in the ETF are capped so that no company accounts for more than 10 per cent of the fund weighting.

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