Five ETFs for Booming LNG Demand
In the energy patch, there are plenty of themes investors need to keep an eye on in the coming years and no shortage of ETFs with which to play those themes. Shale, increased demand for services and offshore drilling are just a few examples of energy themes with which there are ETFs to exploit opportunities.
Another one of those themes is surging demand for liquefied natural gas (LNG). LNG prices remain low here in the U.S., but they're on the rise in Asia. China, the world's largest energy consumer and worst polluter, is looking to reduce that pollution footprint with LNG. India is becoming a major LNG buyer and Japan is boosting LNG purchases an alternative to nuclear power.
In fact, LNG demand has risen 21% in Japan since the March earthquake and China boosted its LNG demand 27% in the first half of this year, according to Trefis. With that, here are some of the key ETFs to play on soaring LNG demand.
SPDR S&P International Energy ETF (NYSE: IPW): Royal Dutch Shell (NYSE: RDS-A) accounts for over 17% of this ETF's weight and that alone makes IPW a valid LNG play. Europe's largest oil company is one of the world's biggest LNG producers and is investing heavily in LNG projects in Australia. BP (NYSE: BP), Europe's second-largest oil company and a major LNG player in its own right, accounts for more than 10% of IPW's weight.
Energy Select Sector SPDR (NYSE: XLE): XLE is an obvious candidate for this list and with good reason. Like Shell, Chevron (NYSE: CVX) and ConocoPhillips (NYSE: COP), the second- and third-largest U.S. oil companies, respectively, are investing heavily in LNG projects in Australia. In fact, Australian LNG projects are one of the cornerstones of Chevron's future growth plans. Chevron and Conoco account for 20% of XLE's weight.
iShares MSCI Australia Index Fund (NYSE: EWA): Energy names don't account for a huge percentage of EWA's weight, but materials stocks with gas exposure do. Bottom line is Australia is the epicenter for future LNG production and foreign companies operating there usually partner with Australian firms. Along those lines, have a look at the...
IndexIQ Australia Small Cap ETF (NYSE: KROO): KROO allocates almost 42% of its weight to materials and energy names and since it's a small-cap play, there are some potential takeover targets in here for companies looking to quickly boost their Aussie LNG exposure.
Guggenheim Shipping ETF (NYSE: SEA): This may seem like a stretch and we admit the Guggenheim Shipping ETF has an ugly chart right now, but look at it this way: Someone has to ship all that LNG from Australia to China, India and Japan. Who is going to do that? Some of SEA's constituents to be sure.
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