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8 Best Oil ETFs in Canada 2024: Invest in the Canadian Oil Sector

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For Canadian investors, Oil ETFs provide exposure to a basket of companies from the Canadian Oil Sector.

ETFs are popular because, for a much smaller management fee than mutual funds, investors get to buy and hold various companies. This takes the stress and work out of picking individual stocks.

In this article, I will cover some of the best Canadian Oil and Gas ETFs for investors in 2024.

Best Oil ETFs in Canada for 2024

  • Horizons Crude Oil ETF (HUC)
  • iShares S&P/TSX Capped Energy Index ETF (XEG)
  • BMO Equal Weight Oil and Gas Index ETF (ZEO)
  • Horizons S&P/TSX Capped Energy Index ETF (HXE)
  • Horizons Pipelines and Energy Services Index ETF (HOG)
  • BetaPro Crude Oil Leveraged Daily Bull ETF (HOU)
  • Horizons Canadian Oil and Gas Equity Covered Call ETF (ENCC)
  • Vanguard Energy ETF (VDE)

Horizons Crude Oil ETF (HUC)

HUC was established by Horizons ETFs in 2009 and trades on the Toronto Stock Exchange.

HUC is slightly different from your standard ETF as its holdings are 100% invested in the winter months’ crude oil futures contracts. It is intended to track the performance of Solactive Light Sweet Crude Oil Winter MD Rolling Futures Index ER.

This unique ETF structure eliminates the volatility of month-to-month prices of crude oil futures contracts.

Here are some key facts for HUC:

  • MER: 0.88%
  • Number of stocks: 1 (consisting of crude oil futures contracts
  • Dividend yield: N/A
  • Distribution frequency: N/A
  • 1-year performance: 26.52%
  • Eligibility: All registered and non-registered accounts

Unlike other energy sector ETFs, HUC does not pay any distribution or dividends. It also has a higher MER than your average ETF.

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iShares S&P/TSX Capped Energy Index ETF (XEG)

This Blackrock iShares Canadian oil ETF was established in 2001 and trades on the Toronto Stock Exchange.

Unlike HUC, XEG is a sector ETF that tracks the Canadian oil industry. It replicates the performance of the S&P/TSX Capped Energy Index, net of expenses.

Despite this being a sector ETF, XEG comes with a high-risk rating. This is likely more due to the volatility in month-to-month oil prices, rather than the underlying companies.

Here are the top holdings by allocation in XEG as of January 2023:

TickerNameAllocation
CNQCanadian Natural Resources LTD25.90%
SUSuncor Energy Inc21.86%
CVECenovus Energy Inc12.94%
TOUTourmaline Oil Corp7.28%
IMOImperial Oil Corp4.47%
ARXArc Resources LTD3.75%
WCPWhitecap Resources INC2.47%
MEGMEG Energy Corp1.99%
ERFEnerplus Corp1.98%
CPGCrescent Point Energy Group1.98%

Broken down by subsectors, 58.51% of the fund is dedicated to oil and gas exploration and production, while 39.27% is dedicated to integrated oil and gas companies.

Given the focus on domestic companies, XEG is a great Canadian oil and gas ETF for those bullish on Canadian oil and gas producers.

Finally, here are some key facts for the XEG ETF:

  • MER: 0.60%
  • Number of stocks: 29
  • Dividend yield: 2.85%
  • Distribution frequency: Quarterly
  • 1-year performance: 53.17%
  • Eligibility: All registered and non-registered accounts

The XEG ETF has performed tremendously over the past year, nearly doubling your initial investment.

It pays a healthy 2.85% dividend yield quarterly and has a higher MER of 0.60%.

BMO Equal Weight Oil and Gas Index ETF (ZEO)

ZEO is an ETF from the BMO global asset management group established in 2009 and trades on the Toronto Stock Exchange.

Like XEG, ZEO comes with a high-risk rating. It holds eleven different stocks of mostly equal weighting across the Canadian oil and gas industries.

Here are the major holdings by allocation in ZEO as of January 2023:

TickerNameAllocation
IMOImperial Oil LTD11.24%
CNQCanadian Natural Resources LTD11.10%
CVECenovus Energy INC11.02%
SUSuncor Energy Inc11.0%
PPLPembina Pipeline Corp10.05%
ENBEnbridge Inc9.79%
KEYKeyera Corp9.76%
TRPTC Energy Corp8.95%
ARXARC Resources LTD8.76%
TOUTourmaline Oil Corp8.07%

And here are some key facts for ZEO:

  • MER: 0.61%
  • Number of stocks: 11
  • Dividend yield: 7.88%
  • Distribution frequency: Quarterly
  • 1-year performance: 39.46%
  • Eligibility: All registered and non-registered accounts

ZEO has a higher distribution yield and the same MER as XEG, which puts it on par with most oil ETFs on the TSX

ZEO’s equal-weighted holdings in many of the blue-chip Canadian oil and gas companies make this a fairly safe investment despite the high-risk rating.

Horizons S&P/TSX Capped Energy Index ETF (HXE)

The second Horizons ETF on this list is more of a standard oil sector ETF. HXE tracks the Canadian energy sector with a capped weighting on any of the holdings in the ETF.

HXE was established in 2013 and trades on the Toronto Stock Exchange.

The most appealing feature of HXE is its very low MER. In exchange for these low fees, HXE does not pay out a dividend or distribution.

Here are the top holdings by allocation in HXE as of January 2023:

TickerNameAllocation
CNQCanadian Natural Resources Ltd24.75%
SUSuncor Energy Inc21.47%
CVECenovus Energy Inc13.46%
TOUTourmaline Oil Corp8.04%
ARXArc Resources Ltd4.31%
IMOImperial Oil Ltd4.28%
WCPWhitecap Resources Inc2.43%
ERFEnerplus Corp2.05%
CPGCrescent Point Energy Corp1.99%
MEGMEG Energy Corp1.90%

And here are some key facts for HXE:

  • MER: 0.27%
  • Number of stocks: 24
  • Dividend yield: N/A
  • Distribution frequency: N/A
  • 1-year performance: 54.59%
  • Eligibility: All registered and non-registered accounts

HXE essentially tracks the same index that XEG does. It has a similar one-year performance return and similar holdings.

As mentioned, the only difference is a lower MER and no distributions.

Horizons Pipelines and Energy Services Index ETF (HOG)

The third entry from Horizons is HOG, an ETF that tracks companies that operate oil pipelines. It tracks the Solactive Pipelines and Energy Services Index, net of expenses.

This ETF was established back in 2014 and is one of the many Canadian oil ETFs on the TSX.

Here are some of the top holdings by weighted allocation in HOG as of January 2023:

TickerNameAllocation
EFXEnerflex Ltd9.32%
SESSecure Energy Services Inc9.15%
KEYKeyera Corp8.50%
PPLPembina Pipeline Corp8.40%
ALAAltagas Ltd8.36%
PKIParkland Corp8.30%
TRPTC Energy Corp8.21%
GEIGibson Energy Inc8.14%
ENBEnbridge Inc8.13%
TWMTidewater Midstream and Infrastructure Ltd8.02%

Here are the key facts for the HOG ETF:

  • MER: 0.65%
  • Number of stocks: 12
  • Dividend yield: 3.78%
  • Distribution frequency: Quarterly
  • 1-year performance: 15.94%
  • Eligibility: All registered and non-registered accounts

HOG has not performed as well as ETFs with oil producers in them.  The ETF has had an average annualized return of 4.21% since its inception.

HOG does pay a good dividend yield at 3.78% every quarter.

While the returns have not been as high, the transport and storage of crude oil have been a far less volatile way to invest in the Canadian oil sector.

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BetaPro Crude Oil Leveraged Daily Bull ETF (HOU)

HOU was established back in 2014 and trades on the Toronto Stock Exchange. While it is labelled as a BetaPro ETF, it falls under the umbrella of Horizons ETFs.

HOU is a leveraged oil ETF that uses 2x leverage for its returns. This means that if the ETF gains or declines, it does so at double the rate of a non-leveraged ETF.

The leveraged oil ETF requires a higher MER and does not offer any dividends or distributions to its shareholders.

Like with HUC, this ETF is 100% invested in crude oil futures contracts

Here are some key facts for the HOU ETF:

  • MER: 1.34%
  • Number of stocks: 1 (crude oil futures contracts)
  • Dividend yield: N/A
  • Distribution frequency: N/A
  • 1-year performance: 22.28%
  • Eligibility: All registered and non-registered accounts

The one-year performance of HOU shows the volatility involved in a leveraged oil ETF. Investors should know that leveraged ETFs are riskier than non-leveraged ETFs.

The 1.34% MER for HOU is extremely high, especially given the fact that it does not pay any distributions or dividends.

best oil etfs in canada

Horizons Canadian Oil and Gas Equity Covered Call ETF (ENCC.TO)

Yet another Horizons Canadian Oil ETF, ENCC, was established in April 2011 and trades on the TSX.

It is not your typical ETF as it is one of a growing number of covered call ETFs. In these ETFs, the fund manager actively sells covered calls against held positions to earn a premium, which is then paid back to shareholders as a dividend.

In exchange for stability and frequent and high dividend payouts, coveted call ETFs typically come with a higher-than-normal MER.

Here are the top holdings by weight in ENCC as of January 2023:

TickerNameAllocation
CVECenovus Energy Inc10.99%
CNQCanadian Natural Resources Ltd10.59%
IMOImperial Oil Ltd10.53%
SUSuncor Energy Inc10.46%
ARXARC Resources Ltd10.17%
PPLPembina Pipeline Corp9.86%
ENBEnbridge Inc9.76%
KEYKeyera Corp9.68%
TOUTourmaline Oil Corp8.79%
TRPTC Energy Corp8.72%

And here are some key facts about ENCC:

  • MER: 0.84%
  • Number of stocks: 10
  • Dividend yield: 13.66%
  • Distribution frequency: Monthly
  • 1-year performance: 40.10%
  • Eligibility: All registered and non-registered accounts

Canadian investors looking to invest in USO will have to buy shares in US dollars.

Vanguard Energy ETF (VDE)

VDE is the US-domiciled Vanguard Energy ETF that trades on the NYSEARCA exchange. It was established in September 2004 and holds over $10.5 billion in total net assets.

This ETF holds 100% American-based oil and gas companies, with 111 stocks that have a median market capitalization of $75.8 billion.

Here are the top holdings by weight in VDE as of January 2023:

TickerNameAllocation
XOMExxon Mobil Corp22.49%
CVXChevron Corp16.14%
COPConocoPhillips6.89%
EOGEOG Resources Ltd3.84%
SLBSchlumberger Ltd3.83%
MPCMarathon Petroleum Corp3.15%
OXYOccidental Petroleum Corp2.98%
PXDPioneer Natural Resources Co2.63%
VLOValero Energy Corp2.59%
PSXPhillips 662.54%

And here are some key facts about VDE ETF:

  • MER: 0.10%
  • Number of stocks: 111
  • Dividend yield: 2.96%
  • Distribution frequency: Quarterly
  • 1-year performance: 62.89%
  • Eligibility: All registered and non-registered accounts

As mentioned, VDE trades on US markets so Canadian investors will likely need to pay foreign exchange to buy shares in US dollars.

How To Buy Oil ETFs in Canada in 2024

ETFs are available at most brokerages in Canada. To avoid paying higher fees, check out these discount brokerages to buy Oil ETFs:

Questrade

Questrade is a discount brokerage that offers Canadian investors zero-commission buying for ETFs. You pay a small fee when you sell ETF shares.

This platform also offers stocks, bonds, mutual funds, options, currencies, and more.

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Wealthsimple Trade

Wealthsimple Trade has gained popularity in Canada, especially amongst younger investors.

Its mobile and desktop-based investing platforms are easy to use, offering free ETF and stock trading.

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Qtrade

Qtrade offers zero-commission trading for 105 Canadian ETFs. Canadian investors can buy Oil ETFs like HOG and HXE without trading fees for buying or selling.

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Oil ETFs Explained

For investors who want exposure to stocks in the Canadian or global Oil industry, Oil ETFs are an excellent asset to add to your portfolio.

Not only do these energy sector stocks offer stability for your account, but many of them also pay a healthy dividend yield to shareholders.

Oil ETFs are popular for long-term investors as the dividends can provide cash flow to invest elsewhere or steadily increase the ETF’s stake.

The energy sector is a major industry in the Canadian economy, and oil stocks are amongst the largest companies that trade on the Toronto Stock Exchange.

Are Oil ETFs a Good Investment?

The Canadian oil industry has historically been great for Canadian investors to invest in.

Oil ETFs provide investors with exposure to Canadian oil companies without the volatility of monthly changes in the price of the commodity itself.

Also, Oil ETFs generally have good performance with a solid dividend distribution and reasonable MERs.

Downsides of Oil ETFs and Stocks

The downside of investing in any single sector is that there is a serious downside if there is a negative catalyst.

A great example of this was the COVID–19 pandemic, where the price of oil plummeted, and there was an overabundance of oil supply.

Investing heavily into oil stocks or only owning Oil ETFs is the equivalent of putting all your eggs in one basket.

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Suncor (TSX:SU)

Suncor was founded way back in 1919 and has been a mainstay in the Canadian energy sector ever since.

It specializes in the creation of synthetic crude from oil sands across North America and is one of the largest oil companies in Canada.

Pembina Pipeline Corp  (TSX: PPL)

Pembina is one of the major oil and gas pipeline companies that operate in Canada. This Calgary company was founded in 1954 and operates throughout North America.

The company operates over 18,000 kilometres of pipelines that transport oil and natural gas around the continent.

TC Energy (TSX:TRP)

Formerly known as Trans Canada Pipeline, TC Energy owns several pipelines across North America, including the failed Keystone Pipeline, which caused shares to pull back over the past year or two.

Still, it is one of the best dividend payers on the TSX, with a dividend yield north of 6.2%.

Enbridge (TSX:ENB)

Another pipeline company and one of the biggest domestic rivals to TC Energy. Enbridge is a massive company with a market cap of nearly $110 billion.

It is one of the largest natural gas pipeline companies in the world and delivers over 20% of the natural gas supply to the United States.

Canadian Natural Resources (TSX:CNQ)

Canadian Natural Resources is an oil and natural gas company that does most of its business in Western Canada.

It also operates several offshore projects in international markets. Canadian Natural Resources is the largest heavy crude oil producer in Canada.

Conclusion: Best Canadian Oil ETFs

The energy sector in Canada has always been a great industry to invest in. With Oil ETFs, Canadian investors no longer need to worry about picking individual oil stocks. They can now have exposure to the entire sector in one basket.

Oil ETFs come in a variety of different types. Some hold Canadian oil stocks, while some hold crude oil futures contracts.

The oil stock ETFs generally pay a decent dividend distribution and have MER that are comparable to most ETFs in the industry.

For a well-diversified portfolio, investors should look to consider adding some of these best Canadian Oil ETFs to their holdings.

Canadian Oil ETF FAQs

What is the best Canadian Oil ETF?

It is hard to pick just one, but it would be between ZEO and XEG. Both have an MER of 0.61% and offer exposure to the blue-chip Canadian energy stocks. ZEO has a slightly higher dividend yield which makes it more appealing.

What is a leveraged Oil ETF?

A leveraged Oil ETF has a multiplier attached to its returns. If it is a 2X leveraged Oil ETF like HOU, then a 25% return will be 50% instead. Using the same logic, a 25% drop would be a negative return of 50%. Leveraged ETFs are generally considered to be much riskier due to their volatility.

Is there an Oil ETF that shorts Oil Companies?

Yes! Try looking at an ETF like the BetaPro Crude Oil inverse Leveraged Daily Bear ETF (HOD). An inverse ETF gains when the index or sector it tracks declines in value.

Do Oil ETFs pay dividends?

Most of them do, although Oil ETFs that only track futures contracts do not pay dividend distributions. Canadian oil stocks pay some of the highest dividend yields on the Toronto Stock Exchange, so naturally, oil ETFs on the TSX also pay a generous distribution.

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Editorial Disclaimer: The investing information provided here is for informational purposes only and is not intended as individual investment advice or recommendation to invest in any specific security or investment product. Investors should always conduct their own independent research before making investment decisions or executing investment strategies. Savvy New Canadians does not offer advisory or brokerage services. Note that past investment performance does not guarantee future returns.

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Enoch Omololu, MSc (Econ)

Enoch Omololu, personal finance expert, author, and founder of Savvy New Canadians, has written about money matters for over 10 years. Enoch has an MSc (Econ) degree in Finance and Investment Management from the University of Aberdeen Business School and has completed the Canadian Securities Course. His expertise has been highlighted in major publications like Forbes, Globe and Mail, Business Insider, CBC News, Toronto Star, Financial Post, CTV News, TD Direct Investing, Canadian Securities Exchange, and many others. Enoch is passionate about helping others win with their finances and recently created a practical investing course for beginners. You can read his full author bio.

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