Profit off rising oil with an ETN

Simon Brown ETF Blog, Latest

Last year the Standard Bank oil Exchange Traded Note (ETN) expired and they issued a new one and with Brent oil at seven-year highs, everybody wants a slice of the action.

The oil price is being driven higher by stronger than expected demand in the last quarter of 2021, according to OPEC. Coupled with lower production as we come out of the pandemic. But ultimately OPEC doesn’t want oil too high as it may speed up the adoption of electric vehicles driving oil demand lower quicker. But some analysts, such as Christopher Wood from Jefferies, sees oil potentially hitting US$150.

Locally investors have limited options to get exposure to a rising oil price with the only stock being Sasol (JSE code: SOL). This makes this ETN well worth a look, albeit oil can reverse almost as quickly as it climbs.

This ETN tracks the Brent oil price (chart below) in Rands with an allocation factor of 100, so every 100 ETNs equals a barrel of oil.

The total expense ratio is 0.35% which is decent and while ETNs always have an expiry date, in this case, is 2041 so not a worry any time soon.

The sad news is because it is an ETN you can’t buy it within a tax-free account, only in a discretionary investing account.

Brent oil, weekly chart over last decade

Brent oil, weekly chart over last decade

ETN name Standard Bank Oil ETN
ETN issuer Standard Bank
Issue date 13 July 2021
Total investment cost 0.35%
ETN Benchmark Brent oil in Rands
Tax-free savings account NO
ETN major holdings Brent oil
Market cap R675million
Performance since listing +32.6%
Dividend yield None

ETF blog

At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.