Energy ETFs are back in focus after prediction markets turned increasingly bullish on U.S. crude, with traders now assigning better odds that oil prices will climb above $90 per barrel before the end of the month.

The shift comes as crude has staged a sharp 25% rally this month, reigniting investor interest in funds tied to oil producers, refiners and energy services companies.

According to The Kobeissi Letter, markets are now pricing a 51% probability that U.S. oil tops $90 this month, up 19 percentage points from earlier levels. If crude reaches that threshold, it would represent a roughly 34% gain since July 2, with the potential to push average U.S. gasoline prices toward $4.20 per gallon. It is currently trading around $85.

While prediction market odds are just conjectures, the move reflects growing expectations that tightening supply dynamics and firm demand could keep energy prices elevated.

Energy ETFs Could Be Early Winners

Historically, rising crude prices have boosted the earnings outlook for oil producers and exploration companies, making energy-focused ETFs a natural way for investors to express a bullish view on the commodity without buying oil futures directly.

The Energy Select Sector SPDR Fund (XLE), the largest U.S. energy ETF with heavy exposure to integrated oil majors such as ExxonMobil Holdings Corp (XOM) and Chevron Corp (CVX), typically benefits when higher crude prices translate into stronger cash flows and shareholder returns.

Investors looking for greater sensitivity to oil prices often turn to the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), whose portfolio is tilted toward exploration and production companies like Permian Resources Corporation (PR). These firms generally experience a larger earnings impact from rising oil prices than integrated energy giants.

Another fund to watch is the VanEck Oil Services ETF (OIH), which tracks companies providing drilling equipment and oilfield services, such as Transocean Ltd (RIG). If producers respond to higher crude prices by increasing capital spending and drilling activity, service providers could also see improving fundamentals.

Leveraged Energy ETFs May See Increased Trading Activity

Should oil continue its upward momentum, leveraged ETFs could attract short-term traders seeking amplified exposure to the sector.

Among the most actively traded products are the Direxion Daily Energy Bull 2X Shares (ERX), which aims to deliver twice the daily performance of the S&P Energy Select Sector Index, and the Direxion Daily Energy Bear 2X Shares (ERY) for investors betting on a pullback. Because these funds reset their leverage daily, they are generally intended for tactical trading rather than long-term investing.

Commodity ETFs Could Also Gain Attention

Beyond equity-based funds, investors expecting oil itself to move higher may also look at commodity ETFs such as the United States Oil Fund (USO), which tracks near-term WTI crude oil futures, and the Invesco DB Oil Fund (DBO), which uses an optimized futures strategy designed to reduce the impact of futures roll costs.

If crude does push above $90, energy-sector ETFs could once again outperform the broader market, particularly after lagging many of this year's AI- and technology-driven gains. Conversely, any easing in geopolitical tensions, stronger-than-expected production, or weaker global demand could quickly reverse the recent surge in oil prices, underscoring the sector's inherent volatility.