The energy space has been undoubtedly the best-performing S&P 500 sector so far in 2022. The S&P 500 Energy Index has been up 50.3% year to date against the broader index’s 16.6% decline.

The strength in the energy space clearly attracted investor’s attention. Various factors have been driving this upside in the sector for a while. Reopening global economies from the pandemic-led restrictions and the accelerated coronavirus vaccine rollout that help tame the outbreak supported the sector. Growing demand from the rising economic activities is making the sector’s prospects bright. Adding to these factors is the macroeconomic element like the Russia-Ukraine war crisis that is resulting in the rally in crude oil.

This attack is bumping up oil prices as Russia is the world’s second-largest oil producer. European refineries procure most of their crude oil supplies from Russia. Notably, the country provides about two-fifths of its natural gas supply to Europe. In fact, Russia emerged as the largest natural gas and oil supplier to the European Union in 2021. Crude oil is turning out to be the beneficiary of this already tight demand and supply market.  In fact, Brent crude oil futures prices hit $139 a barrel in March 2022, witnessing its highest level since 2008.

The trend is expected to remain as the European Union is in talks to agree on a ban on the Russian oil imports. U.S. gasoline demand is also soon going to shoot up as the Memorial Day weekend will mark the beginning of the U.S. summer driving season. According to SPI Asset Management managing partner Stephen Innes, "Oil prices are supported as gasoline markets remain tight amid solid demand heading into the peak U.S. driving season. Refineries are typically in ramp-up mode to feed U.S. drivers' unquenching thirst at the pump," as mentioned in a Reuters article.

Leveraged Oil-Energy ETFs Up More Than 80% YTD

Here we highlight some leveraged oil-energy ETFs that have been up more than 80% so far in 2022.

However, investors need to note that these products are extremely volatile and suitable only for short-term traders. These trades can cause huge losses compared to the traditional funds during turbulent market conditions. Market participants may enjoy higher returns in a short period of time, provided the trend remains in favor, largely due to the compounding effect of these products. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures.