On this week’s episode of ETF Prime, VettaFi’s Head of Energy Research Stacey Morris analyzes the performance of energy ETFs. After, Vanguard’s David Sharp highlights several new fixed income ETFs.

An Update on the Energy Space

The Energy Select Sector SPDR Fund (XLE) was the best-performing sector SPDR ETF in the first quarter. But it saw sharp declines in April. XLE is now down 5% year to date. It’s also the third-worst-performing sector in 2025.

“If we step back and look at 1Q, I was a little bit surprised at how well energy did,” Morris said. “Oil prices were probably better than most people were expecting. In the first quarter, they were mostly above $70 a barrel. Got up to $80 briefly in January.”

Additionally, the technology sector struggled in the first quarter. That can be helpful for energy, Morris said.

However, since the tariff announcements, oil prices have fallen significantly. Oil was above $71 at the close on April 2. It’s now sitting in the high $50s, having reached a four-year low on Monday.

“The oil price picture has gotten a lot worse, and tariffs are a big part of that move. With the tariffs, we had more concerns around global trade, concerns around the economy globally, and then more talk about the potential for a recession. So all of that really translates to worries around oil demand,” Morris explained.

At the same time, in early April, OPEC+ announced it was going to accelerate its unwind of production cuts. That further weighed on oil.

“Basically, [OPEC+] announced that they were going to bring three times as many barrels back in May as what was brought on or slated to bring on for April. Then, over the weekend, they announced that they were going to do that same kind of larger production unwind for June as well,” Morris added.

Essentially, OPEC+ bringing more barrels onto the market while demand concerns are ongoing has weighed on oil and energy stocks since early April.

Impacts of Tariffs for Energy ETFs

Focusing on Canada, the 10% tariff on energy is manageable. It’d less impactful, with lower energy prices, according to Morris. Pipeline assets between the U.S. and Canada tend to be highly contracted, particularly crude.

U.S. refiners in the midcontinent have been geared to run Canadian heavy crude. They’re still going to take that crude. That’s because they don’t have a lot of supply alternatives, Morris said.

Looking at tariffs with China, Morris noted that the energy market is really efficient in terms of rerouting trade flow. It’s fairly easy for LNG or crude cargo to move elsewhere, and trade flows will adjust, she explained.

“If we look at less-well-known hydrocarbons, ethane and ethylene, which are used to produce plastics, those have been exempted,” Morris said. “Propane, which is also used in petrochemicals and has a number of applications, has not been exempted. And that’s something the U.S. exports a lot of.”

“What we’re seeing is exports are still moving. They’re just going to different places. And China is probably getting more cargos from the Middle East,” she added.

Steel tariffs is another one that has come up a lot as energy companies use steel. Pipeline companies have tried to mitigate the impact, with some names preordering critical components, negotiating price caps, and securing domestic steel and mill capacity earlier this year.

While steel costs are higher for a well, it’s still only a small component of the well cost. And other well costs are trending lower, Morris said.

Energy ETFs Worth Highlighting

Compared to XLE, which is down around 5% year to date, the midstream energy infrastructure space stands out for good performance.

“These are companies that operate fee-based businesses like moving oil through pipelines, and storing natural gas. They generate much more stable cash flows,” Morris said. “Midstream provides services under long-term contracts and has much more stable cash flows than the rest of the energy space. That’s why you’ve seen more defensive performance there.”

Midstream companies that have reported results for the first quarter have actually reaffirmed 2025 guidance that they provided earlier this year. “That’s a pretty big contrast to other companies in other sectors where companies maybe are just pulling guidance because there’s so much uncertainty,” Morris noted.

ETFs in the space include the Alerian MLP ETF (AMLP), which is the largest in the category, and the Alerian Energy Infrastructure ETF (ENFR). AMLP and ENFR are fairly flat year to date. But that’s compelling when compared to the rest of the energy space.

Additionally, the two ETFs offer healthy yields, which is something investors like about the midstream space. MLPs are yielding just under 8% currently. Broader midstream — which includes MLPs and corporations — is yielding about 5.5%, Morris said.

“For people looking for a little more defensive energy exposure or to collect a nice yield as they ride out some of this volatility, midstream can be kind of a more interesting space,” she noted.

On the other hand, producers and oilfield service names have seen the most weakness due to their sensitivity to oil prices. The S&P Oil and Gas Exploration and Production ETF (XOP) is off over 14% and the VanEck Oil Services ETF (OIH) is down nearly 21%.

Trends Emerge Among Vanguard ETFs

Volatility has pulled back slightly in the past few weeks. It is currently below the 50-day moving average but still 25% higher than the 200-day average.

Vanguard’s mantra has always been to stay invested and consider one’s time frame, risk tolerance, and stay in the markets, Sharp said. He gathered interesting insights from the firm’s brokerage platform that reflected investors following this messaging.

“Even during the height of volatility from the third to the ninth of April, 91% of our investors did not place a single trade,” Sharp said. “Those that did trade, there were 4.8 buyers to every seller within our brokerage platform.”

Sharp noted that Vanguard saw elevated volume, but not as much as one may expect. Volume was elevated by about 36% in April relative to March.