Investors looking for exposure to the energy sector do not have to limit themselves to Australian oil and gas shares.
There are ASX exchange traded finds (ETFs) that provide access to global energy giants in a single trade. One fund that does this is BetaShares Global Energy Companies ETF – Currency Hedged (ASX: FUEL).
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What is the FUEL ETF?
The BetaShares Global Energy Companies ETF is designed to track an index made up of the largest global energy companies outside Australia, before fees and expenses.
The fund is also hedged into Australian dollars. This means it aims to reduce the impact of currency movements between the Australian dollar and offshore markets.
The FUEL ETF gives investors exposure to some of the biggest energy companies in the world, including Shell (LSE: SHEL), Chevron (NYSE: CVX), and Exxon Mobil (NYSE: XOM).
These companies are very different from many Australian-listed energy businesses. They are larger, more geographically diversified, and often vertically integrated across exploration, production, refining, distribution, and trading.
That scale can be important. Global energy majors typically have deep balance sheets, broad asset bases, and operations across multiple regions. This can provide exposure to global energy demand without relying on a single project, basin, or domestic market.
The fund's top holdings also include TotalEnergies (LSE: TTE), Siemens Energy (ETR: ENR), BP (LSE: BP), ConocoPhillips (NYSE: COP), Enbridge (TSX: ENB), Canadian Natural Resources (TSX: CNQ), and Suncor Energy (TSX: SU).
The fund uses a passive, index-tracking approach. This means investors are not paying for an active manager to pick energy stocks. Instead, it provides broad exposure to the sector through a rules-based portfolio.
ASX ETF tipped as a buy
According to The Bull, the team at Fairmont Equities believes that investors should be considering this ASX ETF.
This week, it has recommended the fund as a buy for a second time. This is due to its belief that the outlook for global energy prices has strengthened. The expert said:
I recommended this exchange traded fund as a buy in TheBull.com.au in mid February because I believed the energy sector was poised to move substantially higher. With the onset of the war in Iran after my recommendation, I'm now more convinced that energy prices will increase from here given supply disruptions.
This ETF captures the largest global oil and gas companies. This ETF broke out of a multi-year trading range earlier this year, and any dip provides a buying opportunity, in my view.
Ultimately, what happens in the Middle East will likely have the biggest impact on the performance of the BetaShares Global Energy Companies ETF in the near term. If a peace deal is agreed between the US and Iran, oil prices and the FUEL ETF could come under pressure.
