ETF Prime: Morris Provides Update on Energy ETFs

On this week’s episode of ETF Prime, Stacey Morris, head of energy research at VettaFi, joined Nate Geraci to provide an update on energy ETFs and the sector in 2025. Later, Newfound Research’s Corey Hoffstein and Quantify Funds’ David Dziekanski discussed the challenge of combating ETF copycats who repackage unique ideas as their own.Energy Prices React to HeadlinesWTI crude saw surprising strength in January, Morris said, as prices hit roughly $80 per barrel after the Biden administration implemented tougher sanctions on Russia.  “I think that’s probably the point where you saw energy up about 10%,” Morris added.  Since Trump took office, oil prices have been driven significantly by comments made by the new administration. This includes comments around sanctions, restricting exports from Iran or Venezuela, tariffs, OPEC+, and even orchestrating peace between Russia and Ukraine.   “Oil has been very headline driven,” Morris said. “Generally, when you look at the energy space, you know these stocks are driven by what oil is doing.” Natural gas prices, on the other hand, have fluctuated with the weather. Natural gas saw some strength in mid January before settling back down.  “[Energy] stocks are doing okay. They’re kind of bouncing around. It feels a little directionless because I think there’s a lot that’s up in the air with the oil outlook,” Morris said. “A lot depends on what the administration ultimately decides to do on a couple things, but energy performance has been pretty good.” “I think generally for energy, it’s kind of hard to predict the next move when the oil picture remains very unclear and very driven by day-to-day news flow,” Morris added.Energy ETFs See Outflows — With an ExceptionEnergy ETFs have seen a combined $2.8 billion in net outflows in 2025 to date. Morris pointed to the Energy Select Sector SPDR Fund (XLE A), the Vanguard Energy ETF (VDE A), the VanEck Oil Services ETF (OIH B+), and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP B+). Across the board for these four large energy ETFs, shares outstanding have been on a steady decline since the end of 2022, as energy stocks have not moved much since then.  “XLE was up almost 60% on a price return basis back in 2022, when Russia invaded Ukraine. You saw energy prices spike across the board,” Morris said. “Since the end of 2022, XLE is essentially flat, maybe up a couple percent on a price return basis. OIH, the oilfield service ETF, is down. XOP is basically flat. And we’ve seen some volatility in oil over the last two years.” Morris said investors are looking at opportunities in other sectors, as they may not be interested in maintaining energy exposure when the oil picture is as unclear as it is now. “The reality is, when you look at the energy space, the performance strength and the flows are really just in midstream,” Morris said. “That’s a portion of energy that can work when oil isn’t doing much and it’s actually seeing tail ends.”Midstream: A Bright Spot in Energy ETFsMidstream companies provide services for fees, such as moving oil or natural gas through pipelines. This business model leads to more stable cash flows and less sensitivity to oil prices. “Historically, this has been a space that’s more income focused,” Morris said. “Companies here generate free cash flow. They’re growing their dividends; they’re doing some buybacks. They’re executing well, but that’s also leading to good performance independent of what’s going on with oil.” The largest ETF in the category, and the second largest energy ETF overall, is the Alerian MLP ETF (AMLP A-). Its underlying index was up 18% last year on a price return basis and up 14% in 2023, despite oil prices not doing much during that time. AMLP is yielding around 7%, so total returns are even higher. Notably, MLPs are already up around 9% this year on a price return basis, Morris said. Broader midstream, which includes both MLPs and C-corps, saw even better performance last year. The underlying index for the Alerian Energy Infrastructure ETF (ENFR )  was up 35%. The strong performance was driven by natural gas opportunities. There was a lot of excitement around the long-term outlook for North American natural gas demand, largely driven by exports as well as data centers.  The midstream space has also seen strong flows, as AMLP saw over $1 billion in inflows in 2024. The fund has seen over $260 million in inflows year to date as of February 18. Broader midstream ETFs have also seen strong flows last year and into 2025. “Midstream has had the performance, that’s where the money’s been flowing,” Morris said. “Midstream has really been the exception to what has otherwise been a pretty challenging kind of backdrop for broader energy.ETF Intellectual PropertyIt takes a lot of effort to get an ETF out the door. However, there’s a second step: actually bringing in assets and getting traction, Hoffstein said. This is something that’s more challenging for small shops and newer ETF players. One key challenge for smaller ETF players is the commoditization of products. Once one new, innovative product is released and becomes successful, many copycat products will come to market.  “That’s just the way this world works, you are ultimately going to have every product concept commoditized,” Hoffstein said. “There’s a commoditization of products over time. That is hopefully to the benefit of the end consumer, because it does create price pressures, but it does make it harder for smaller innovators to protect themselves from the larger players.” Listen to the entire episode of ETF Prime, featuring Stacey Morris, Corey Hoffstein, and David Dziekanski:For more news, information, and analysis, visit the Energy Infrastructure Channel. vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for AMLP and ENFR, for which it receives an index licensing fee. However, AMLP and ENFR are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of AMLP and ENFR.