Exchange traded funds (ETF) tracking oil and gas stocks have been falling out of favour with investors. As at November, their net assets were $21.9 billion, which is the lowest they have been in a year. As of March of this year, the value was $24.4 billion. Ironically, the mass desertion has come at a time when Brent Crude oil prices are at their highest level in recent time, having more than doubled from $27 per barrel in January last year, to over $60 in 2017.
Despite the impressive rally, oil shares are down 3.5 percent in Europe this year, while the pan-European STOXX 600 index is up 6.5 percent. Last year, oil stocks in Europe were up 23 percent, as oil prices bounced back from a dismal 2015.
Though the future appears bleak for oil companies, their present value is not lost on investors. Oil companies are still paying out more dividends than most, and their income value will not quickly be overlooked. While the STOXX 600 has a yield of 3.2 percent, BP and Shell yield roughly 6 percent. This is much higher than the FTSE 100’s 3.8 percent and the top performing stock in the European tech sector, Nokia, which is 4.2 percent.
Oil still remains the most vibrant sector in Europe, with some analysts expecting it to remain the industry-favourite for a few more years. Oil companies are taking no comfort in this however, as Shell has announced that it will be investing more in renewable energy moving forward.