Royal Oil – How to Invest in Oil Industry
In the wake of 2018 oil prices literally skyrocketed, making the investors rich. This money pie is worth trillions indeed. And you can have a slice of it by the way. We’ve prepared for you a handy guide about black gold investments.
It takes only 24 hours for the industry to procure about 9.35 million BPD in the USA alone
But odds are you can’t afford buying thousands of physical barrels filled with oil. That’s why your only option so far is to purchase crude oil ETF (exchange-traded funds).
Here’s where you can do it:
- United States Oil Fund
- SPDR S&P Oil & Gas Exploration & Production.
- Vanguard Energy.
- Alerian MLP ETF.
- Energy Select Sector SPDR.
The ETFs trade/sell similar to the regular stock and mutual fund. But to start operating with them, you will need to get a brokerage account first. It’s possible via the likes of TradeStation, USAA, Schwab Corporation, Fidelity etc, Capital Markets. NOTE: Research your broker firm first.
After it’s done, consider investing in:
- Occidental Petroleum.
- Enterprise Products Partners.
They are the biggest oil producing/refining companies. The price of 1 fund varies from $10 to $30 as of now, but it’s never too stable.
All in all ETFs are perfect for beginners and casual investors.
A riskier way, which requires meticulous researching and monitoring:
- Oil production in Saudi Arabia, South America, Russia, Norway etc.
- OPEC reports.
- Oil demand/supply volatility.
- Rise/decline in air transporting.
- Gasoline prices etc.
Futures can be purchased via New York Mercantile Exchange (NYMEX) and you’ll need a brokerage again. This is how they work:
- You buy the oil futures contract at a locked-in price ($100/barrel).
- The futures expires in 6 months.
- The price may go higher than the locked-in price ($105).
- Exercise your futures to harvest lucrative profits.
If the contract size was 1,000 barrels, you’ll earn $ 5,000. The only difficulty is that the price may go lower instead, hence the necessity of thorough researching.
Tip: Read the news on futures trading every day. If you notice that an airline company, a fuel-supplier, energy contractors etc. are interested in oil/gas futures – it’s time to take an action.
Despite the oil market instability and November’s oil stock plummeting, history and practice show that crisis is always followed by the market bringing more profits eventually.