Oil Crash Hits These European ETFs Hard - ETF News And Commentary

Countries with heavy oil exposure have faced extremely rough trading in recent months as steep losses started to pile up in the space. This prime commodity has entered bear territory having slid more than 40% since June and touched the five-year low level. Brent crude prices are presently hovering around the $60/bbl. level. A supply glut, ‘no production cut' by the OPEC nations and anemic demand outlook are wrecking havoc on this liquid commodity.

This has taken a toll on oil-rich nations which are among the top exporters of the commodity. As a result, the stocks and related ETFs of these nations have seen plunging share prices for quite some time now.

One such nation is Norway. Despite being the world's

oil producer and second major natural gas exporter after Russia, Norway is yet to get a strong footing in terms of overall growth. Notably, Norway derives over 20% of its national income from its fossil fuel production.

In fact, the nation is so vulnerable to oil price collapse, that its central bank suddenly slashed interest rates by 25 bps to 1.25% in early December. Not only this, its central bank raised concerns about the growth prospect of its economy saying that Norwegian growth will be sluggish unless Brent crude rebounds over the $70 level, as noted by

.

The news pushed its currency, the krone, down to the 11-year low level against the greenback and the five-year low level relative to the Euro (read:

).

Basically, slowing activity in the all-important energy sector and a drastic decline in oil prices to keep the business environment at the same level in the near future forced the central bank to take such a step. Per

, several new oil projects in the North Sea and Europe might freeze as plummeting prices compel oil producers to postpone their projects.

The situation is so severe that the Norwegian central bank expects a 15% decline in oil investments in 2015 with a visible aftershock on the unemployment front and domestic economy. Being part of the already troubled Europe, the oil crash is strong enough to spoil Norway's near-term growth outlook. The central bank indicated a “50-50 chance” of an additional rate cut next year.

Statoil, a Norwegian oil company having huge state ownership, has lost about 50% in share price over the last six months (as of December 15, 2014). Statoil is considering a suspension in expensive oil projects as these are unlikely to return adequately given the current oil prices, per

.

In any case, three Scandinavian nations ─ Norway, Denmark and Sweden ─ are presently bearing the brunt of the waning Euro zone. The Scandinavian countries ─ so far successful in navigating through the European turmoil ─ depend heavily on mainland Europe for export. Thus, slow demand from the mainland Europe weighed heavily on the Nordic region (read:

). 

All these trends have combined to push investors out of Scandinavian securities. Danish ETF

(

), which has added about 5.1% so far this year thanks to its relatively better-placed economic profile among the Euro zone strugglers, has shed about 10.8% in the last 26 weeks (as of December 15, 2014) (read:

).

The positive year-to-date return of EDEN was in stark contrast to the 8% loss experienced by the broader and biggest Europe ETF

Another pillar of Scandinavia, Sweden, saw its ETF

─ lose about 7.7% in the year-to-date frame and has plunged about 10.2% in the last 26 weeks.  

On the other hand, Norway ETFs

and

have been bleeding heavily in recent weeks. Both ETFs have plummeted about 27% each in the year-to-date frame (as of December 15, 2014). Over the last 26 weeks, the duo was down about 35%, a reflection of the impact from the oil rout.

Notably, Statoil is the top holding of both NORW and ENOR with about 16.55% and 15.42% exposure, respectively. The energy sector also takes the first spot in NORW and ENOR with a respective 40% and 31% share (read:

).

Though the calendar will change to 2015 in a few days, the oil collapse is unlikely to turn around soon. Thus, ETFs with high oil production exposure may trade in the red over the coming days. Investors not being able to resist the euphoria for Europe investing, thanks to the QE talks, should avoid Norway exposure for as long as the oil crisis remains in headlines.

Want the latest recommendations from Zacks Investment Research? Today, you can download

.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.