Oil prices are now heading toward a tough end to 2025, dented by growing supplies and waning confidence that geopolitics alone can rebalance the market. In this backdrop, oil- and energy-focused ETFs are highlighting how producers and majors are navigating a supply-heavy market.
U.S. crude fell by nearly 3% on Tuesday to its lowest level since the beginning of 2021, with a total decline of about 23% this year, its weakest performance since 2018. Although crude prices rose modestly on Wednesday, with the U.S. taking a tough stance against Russia and imposing a blockade on Venezuelan oil exports, overall sentiment remains negative, as supply is set to exceed demand in both this year and next, according to a Bloomberg report.
The prospect that surplus levels will carry into 2026 is increasingly influencing market sentiment. OPEC+ has been rapidly resuscitating its idle production capacity, while production levels in other key players have remained strong, making it difficult for geopolitically driven price rallies to sustain themselves.
Energy ETFs Track Pressure From Lower Crude
However, the same context has maintained a focus on oil and energy ETFs, which provide investment exposure without using futures contracts. Funds tied to exploration and production companies, as well as broader energy benchmarks, indicate the profitability challenges that those sectors face with a decline in crude oil prices.
Leveraged and inverse ETFs offered by Direxion Investments demonstrate the manner in which movements within the price of oil can be tracked via equity market exposure. The Direxion Daily S&P Oil & Gas Exploration & Production Bull 2X Shares (NYSE:GUSH) and its inverse shares, the Direxion Daily S&P Oil & Gas Exploration & Production Bear 2X Shares (NYSE:DRIP), follow S&P Oil & Gas Exploration & Production Select Industry Index, a U.S.-centric index of exploration and production firms that tend to mimic market movements of crude oil.
During a year of declining prices, the sector has been pressured by declining margins and cautious capex spending. These ETFs have excelled at short-duration trading, giving traders the advantage of oil price volatility this year.
Single Stock And Sector-Wide Trades
Single-stock ETFs linked to energy giants have also been a part of the 2025 mood, as integrated energy companies seek scale, diversification, and dividend income to offset weaker crude prices. The Direxion Daily XOM Bull 2X Shares (NASDAQ:XOMX) and Daily XOM Bear 1X Shares (NASDAQ:XOMZ) allow investors to take a targeted position in energy industry leader Exxon Mobil Corp (NYSE:XOM), a benchmark for its global reach and vertical integration.
In a newsletter, Direxion mentioned that Exxon’s “vertical reach lets them profit across the value chain, even when crude dips.” This calls for attention to XOMX and XOMZ: one for days with positive movement, such as Wednesday, and the other for dull days.
Supply Outlook Clouds The Path Ahead
Looking ahead, the International Energy Agency has warned that the coming surplus could be the largest since the pandemic, driven by OPEC+ restoring idled output and steady production growth elsewhere. As oil approaches the end of 2025 with losses, ETFs offer a snapshot of how investors can engage with the energy sector, even as the market contends with an increasingly supply-heavy outlook.
Read Next:
Photo: Maksim Safaniuk On Shutterstock.com
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
