Bipartisan bill is in the works to ban Russian oil and LNG, what does it mean for energy ETFs?

Artem_Egorov/iStock via Getty Images

Oil and gas exchange traded funds may see some additional support towards broader gains as a new bipartisan bill is being worked on that would effectively ban U.S. imports of Russian oil, liquified natural gas, petroleum, and petroleum products.

The move can place wide-ranging pressures on the already high oil and gas prices, causing them to tick even higher. Additionally, it can start a domino effect for other countries to take similar action.

The energy ETFs that can find themselves in play are large-scale energy funds, oil exploration funds, equipment and services ETFs, and oil and gas futures funds. See a breakdown below:

Large-Scale Energy ETFs

Two leading broad-spectrum energy ETFs are the Energy Select Sector SPDR ETF (NYSEARCA:XLE) and Vanguard Energy ETF (NYSEARCA:VDE). XLE is +32.2% YTD and has $36.17B AUM, while VDE is +31.1% YTD with $6.99B AUM.

Oil Equipment & Services ETF

The VanEck Vectors Oil Services ETF (NYSEARCA:OIH) tracks oil services-related companies and is one of the leaders in the space with $3.27B AUM. From a performance stance, OIH is +36.1% YTD.

Oil Exploration & Production ETF

The SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARCA:XOP) provides exposure to the energy market's exploration-and-production segment of the energy industry. Currently XOP is +27.3% YTD and also has $4.5B AUM.

Oil & Gas Futures ETFs

Energy ETFs that offer exposure to oil and natural gas prices through futures contracts that can be affected are the United States Oil Fund (NYSEARCA:USO), ProShares Ultra Bloomberg Crude Oil (NYSEARCA:UCO), United States Natural Gas Fund LP (NYSEARCA:UNG), and the ProShares Ultra Bloomberg Natural Gas (NYSEARCA:BOIL).

So far in 2022 USO is +40.7%, UCO +88.1%, UNG +38.2% and BOIL +66.9%.

The bipartisan bill is being led by the democrat senator of West Virginia, Joe Manchin, and the republican senator of Alaska, Lisa Murkowski. As of now, there appears to be strong interest among republican senators and a growing interest from democrats after President Joe Biden said: "nothing is off the table" when asked a media question if the U.S. would ban Russian oil.

On Wednesday, at least seven major oil and gas stocks have hit fresh 52-week highs, as crude hit $112 per barrel.

Comments

[kmi]

I posted this elsewhere but I'll repost here:

Pre covid
Oil 1/2/20 $61.18 today $113.
NG 1/2/20 $2.13 today $4.75

In the Trump era, along with a massive decrease emissions and growth in GDP Nat gas beat coal for electricity production for the first time ever.

In the Biden era, at these prices, I expect coal to see resurgence along with emissions. Check out this amazing chart on coal pricing, expand to 5 yr tradingeconomics.com/...

The administration's poor policy - or more precisely its implementation of ideologically driven science-free goals - is going to produce the opposite result from its intentions, which is typical of economically illiterate bureaucratically driven activity.

Bottom line: Don't ignore coal in any assessment of global energy consumption.

[uttendorf]

@kmi actually May futures that came out earlier today has coal even higher. $425.

[Mad Banker]

This is known as the Biden Doctrine:

Never Attribute anything we do to Malice That Which is Adequately Explained by Stupidity or Fraud.

[taskassistant]

@Mad Banker It was a real shocker that Americans voted in A Non-Trump. If this is any explanation of the intelligence level of American Voters? Where these the young inexperienced students who blindly hated Trump? This is the outcome of Social Media, and propaganda promotoed by Dem/Libs agenda. So hows this working for USA? Not Good!!
Do we listen to Biden, Schumer, Pelosi, The Squad?
Hell No!

[kmi]

@Mad Banker

You win the Internet. lol

[nvg]

Idiots

[Refrack]

Unlikely to happen. High gas prices are not good politically which is all that matters. I expect Russian crude to find its way back to markets.

[ckarabin]

Isn't Russian LNG a big factor in the Boston area? I thought they had to import LNG because the denied the pipeline down to the Marcellus. If so, that decision will come back to bite them now!

[taskassistant]

@ckarabin Lol Cuomo/Hochel are banning Natural Gas connections for new build housing in NYC. So this should be interesting how they will create enough electricity for everything in State NY.

[ckarabin]

@taskassistant It will be funny! Their demand for electricity will surely overtop their generation capacity. Wait for the first hot, calm day in July and watch the lights go out! Hopefully there will be an election soon thereafter! Now hook up millions of EV's for recharging and see what happens! Those NY politicians are about to get a dose of reality!

[lowdawg81]

By summer itll be like pandemic lock downs again. No one will be able to afford going anywhere.

[ckarabin]

@lowdawg81 It's not a lockdown if you can afford it. Big difference

[Throwing Ketchup]

@lowdawg81 Umm... nope, no, nyet. Take a breath.

[magenta17]

Biden may not sign it since he refuses to keep us energy-independent! Longz OIH! :-)

[taskassistant]

@magenta17 Impeach him. Dont feel bad, he wont remember!

[magenta17]

@taskassistant May happen if midterms turn against the Dems! 🤪

[darnoc111]

So where will the new England area get its energy from? Too bad the many pipelines that were proposed were never allowed to be built. Lots of bad decisions leads to lots of pain for people.

[tennis111]

@darnoc111 it serves them right. Maybe they will vote a little bit smarter the next time. But they probably won’t.

[Brian Dravis]

If you want to hurt Russia open the pipelines, expand fracking and supply lng to Europe! This bill helps no one.

[User 3434471]

@Brian Dravis Biden will eventually be compelled to do exactly that. The more sanctions, the quicker that will happen. The Republicans will also have to agree to open the spigot on money for rolling out renewables at the same time. Neither expansion of fossil fuels or renewables can do it alone. It will require more nuclear power too.

The solution will require a bipartisan Fossil Fuels-Green Deal "grand bargain" providing a multi-part solution for satisfying the free world's energy needs without Russia. The end goal should be America being a major exporter of fossil fuels, while reducing our own needs for fossil fuels to the minimum required, thanks to greatly expanded renewable and nuclear power generation.

[ckarabin]

@donfdraper They don't need Biden to make that happen. Biden does not control fracking, fracking companies control fracking. Now that they can hedge the output of a new well at close to $5, I would expect to see drilling start creeping up (actually drilling is rising now but since DUC's are plunging, the drilling is offsetting fewer DUC's coming on line and thus no net production increases)

[User 3434471]

@ckarabin There is no possible way to expand American fossil fuels production to a level need to replace Russian fossil fuels worldwide without getting approval for new sites from Biden's regulators at the EPA, BLM and other agencies. This would require producing far more than occurred under the Trump Administration. It would require them to also not unnecessarily delay permits as they have become accustomed to since Biden took office.

Biden's EPA can delay or block permits for any new drilling or fracking. Biden's BLM and EPA both control any potential extraction on federal lands, such as the Green River Basin. America would have to expand extraction of oil and coal to levels never seen in history. All this requires the bureaucracy to get out of the way. The companies must be willing to do it, but you can bet they will be more than willing to do so with prices being as high as they are and as high as expected in the future.

Simultaneously, renewables must also be expanded. We are talking about a Berlin Airlift of energy not business as usual for either the government or energy industry. This is now necessary for the national security of the entire free world, regardless of what the bickering partisans on either side have to say about it. It's time for them to GTFO of the way. www.youtube.com/...

[1504661]

Well this changes everything.

Republicans, extremists and Russian trolls
will now all have to re-do and change all their mindless talking points
on how the USA is doing such a poor job responding to the invasion.

[Seriol]

@1504661 Well this changes everything.

Democrats, extremists and Green Energy trolls
will now all have to re-do and change all their mindless talking points
on how the USA is doing such a great job in deciding to kill its own energy industry.

But besides that, there are two very different wings of the R party. The neocon/Bush wing is led by Lindsey Graham, Mitt Romney, and the establishment and are gung ho on getting more involved. Then the no-more-wars wing that soured on the neocons after the Iraq War- a base Trump voter. Tucker Carlson is the voice of the anti-war side, and he even praised Biden's stance to not enforce a no-fly zone the other night. Differentiate between the two.

[Throwing Ketchup]

@Seriol " Tucker Carlson is the voice of the anti-war side..." Let's just call him what he is: the new Neville Chamberlain.

[Seriol]

@SnowDog222 France and the UK have nukes. NATO has triple the conventional forces of Russia, and double without the US counted. Why are we risking our nation for Ukraine, therefore? Chamberlain believed Hitler. He was naive. Tucker believes Europe should shoulder this fight.

[n00binvest19]

I’m loving this crap. I’m getting so rich I almost feel bad

[Tizthelaw2020]

@n00binvest19 This is a stock pickers market, and value conscious have known for months. Most "Funds " don't see my Funds!

[Seriol]

@n00binvest19 What moves?

[415003]

@n00binvest19 do tell.

[martyr1777]

Its funny reading these comment whining about 'what are we going to do without their oil?!'

No doubt the same people that whine about 'why aren't we energy independent?!'

Our politics have gotten so pathetic.

[C185]

@martyr1777
Are you incapable of logic? Obviously the two are interdependent, not mutually exclusive. Not only has Brandon killed US energy independence, but he's refusing to change course. Either you increase domestic supply, or you source it from Russia and OPEC. Brandon did the latter, so both criticisms apply.

Brandon mentioned the Uranians in his SOTU. Maybe he can find them and see if they have any oil.

[Dividend Seeker]

It's not clear how this harms anyone but the United States. If the US doesn't import it, someone else will...

Just chalk it up to another useless idea coming out of Washington.

[User 462216]

Who are they going to ban from buying Russian natural gas and oil.
Please!
That squirrel in the Whitehouse can barely count it's nuts twice and come up with the same answer.

[Geo67]

We paying $6.06 Canadian for one US gallon !

[mliu76400]

dumbest thing I've heard all week. 1) how much does US buy these Russian products? 2) if US stop buying them, there will always be someone who's willing to buy, given how important oil is in today's world, especially if the price is right.

[Heavy Fuel]

$5:00 a gallon, right around the corner......

[Mr Briggens]

@Heavy Fuel

So what if that helps put Putin in his place.

[Tizthelaw2020]

@Mr Briggens.... money well spent!

[kurioz]

Anything is better than buying oil from the devil that threatens nuclear annihilation.

More drilling, more pipelines from Canada, more oil tankers from peaceful countries, more EV, more power from nuclear power station and green/wind/solar power, better energy efficiency in transportation, HVAC, appliances, industry.

Anything is better than funding murderous psychopath with his finger ready to launch nuclear missiles on European and American cities.

[hdnw]

@kurioz i know right? literally worse than covid

[n00binvest19]

@kurioz pure garbage from a brainwashed leftist

[NaazaarU]

@kurioz 100% agree! The world has to destroy Hitler jr before it’s too late. No economy is safe if that devil stays alive

[hdnw]

brandon really does care about the iranian people!

[JPow's Broker]

This is foolish there is no way to "ban" commodities, they are completely fungible. Any oil we don't buy, gets sold to another nation. There will always be someone to buy.

The big question is what are we doing to get oil from goin to $200. Oil is Putin's Power, the higher oil goes the stronger Putin gets.

[dlinhat]

@JPow's Broker Correctimundo! Chinese getting energy at a discount and building coal plants, laughing at the greens all the way.