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Here's an under-the-radar way to play oil amid all the trade fears

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Oil ETFs are tanking—here's how experts say to play them

Oil tumbled Monday, but one market expert has an under-the-radar way to play the commodity amid all the turmoil.

Concerns centered on growing trade tensions between the U.S. and China sent the commodity down more than 2% at its lows Monday while energy stocks tumbled along with it. The oil and gas exploration ETF (XOP) took a big hit in particular, plunging 4% to its lowest level in more than three years.

And according to Dave Nadig, managing director of ETF.com, the fundamental outlook for crude isn't going to get much better.

"We're in a global oil glut, and we've got OPEC trying to do something about it but all on the backs of Saudi Arabia," he said on Monday's "ETF Edge." "That's not going to last forever. I think there's really nothing I can look at except maybe a calamity in the Persian Gulf that would drive oil up."

Nadig also adds that "everything is pointing to oversupply" for the oil market, meaning that with supply outweighing demand, crude prices will struggle to rally, if they rally at all.

That's got Kevin O'Leary, chairman of O'Shares ETFs, suggesting an unconventional way to play the oil and energy space.

"The time to buy oil is when everyone hates it, and they're hating it a lot right now," he said Monday on "ETF Edge." "But you don't have to buy oil itself. You can buy currencies and indices of countries that are basically tied and pegged to oil prices."

In other words, O'Leary is suggesting turning toward countries whose markets are heavily correlated with oil prices. And in this case, O'Leary thinks the best play is the Canadian stock market.

"You can basically buy and transfer some dollars into Canadian dollars and buy an index like the XIU (the Toronto Stock Exchange ETF), which is a 60-stock Canadian index that is basically energy and banking, " he said.

"But here's the sweetener: If oil moves, you get a lift in the currency and you get a lift in the index, which is how I'm playing it," O'Leary added.

In addition to the Canadian market, O'Leary said that the Australian stock market also moves closely to the price of oil.

Despite the recent volatility for crude, the commodity is still up 22% year to date. The energy ETF (XLE), however, has only rallied 3% this year, and energy is still the worst-performing sector in the S&P 500 this year.

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