Oil is a type of investment that attracts many. The oil’s high demand and stability, as well as the fact that it is a raw material that is still difficult to replace, make it often interesting to speculate in the oil price.
So, how do you invest in oil?
You can invest in oil by buying oil certificates, oil certificates are a type of security that is very suitable for those who want to speculate on how the oil price will develop in the future. To be able to buy oil certificates, all you need to do is become a customer of an online broker that offers oil certificates.
Fortunately, you do not need to buy the physical oil if you feel that an investment in oil is the right thing to do. There are lots of different investment products you can buy that follow the general price development of oil.
What is oil
Without oil, there would be no modern capitalism and therefore the oil industry is also one of the largest industries in the world.
In the last 10-20 years, there has been a huge discussion about our dependence on oil because it harms the environment and therefore some believe that oil will not be used in the future.
When it comes to investments, this is hardly of great importance for investing in oil, as it is a trade that is going on all the time.
So it does not really work as with warehouses where you buy oil and store it for 20 years.
Most investments in oil are for a shorter period, so even if you think the market will disappear in the future, there are still plenty of opportunities for revenue at the moment.
Since you do not buy oil in a barrel, you must always buy oil via a trading platform and there are many options here.
Investors with a lot of money usually trade on a trading platform with so-called futures, where you buy a contract that you can buy a barrel of oil at a certain price in the future or sell it.
For personal investors, this type of trading is made easier through CFD trading, but CFD trading also applies to assets other than oil.
So let’s take a closer look at the possibility of investing in the oil price for the personal investor.
Why does oil have a value?
Oil, like all other raw materials, has a value because it is a commodity that is traded and used by many consumers around the world.
Oil has always been very important to us, even though oil is currently being replaced more and more as the use of more environmentally friendly alternatives increases.
What affects the oil price?
What basically controls the oil price is supply and demand.
The more demand there is for the oil in relation to the supply that is available, the more buyers will be willing to pay for the oil.
If demand were to increase, or if oil starts to run out, the price could also rise.
In the same way, the price can decrease if demand falls or if it turns out that there is much more oil than we actually need.
Why invest in oil?
When the private investor trades in oil, they do not do so in view of what is happening in the energy market of the future.
It will often be a short-term trade. Therefore, investing in oil is extremely popular for active investors and day traders as the price of oil fluctuates significantly.
You already know this today for the price of petrol, where you can clearly see how the oil price constantly affects petrol prices.
However, there are some options if you want to invest in oil in the long run. Here you will usually find some companies that you can invest in.
Obviously, these companies can change focus over time if the oil industry changes, but in principle you invest in them because you think they can stay with extracting oil.
Investing in oil is probably most interesting for day traders and active investors.
That was also the reason why the Millionaire Club had a lot of trade in oil and metals. Unfortunately, it is no longer online.
How do you actually buy oil?
As mentioned, you have a number of options when you want to invest in oil. You can buy shares with companies that work in the oil industry. It can both be the company that delivers the machine to the oil industry or extracts new oil fields.
It is more common to buy an ETF or make a CFD trade in oil prices. For these options, you can make money on how volatile oil prices are.
The most commonly used method of investing in oil is clearly futures and CFD trading. To invest in this way, you should have an investment account on a platform based on CFD trading.
Top 5 Ways on How to Invest In Oil
1. Invest in oil funds
There are not many oil funds that only invest in oil. But some of them are BGF World Energy and Schroder ISF Global Energy.
Investing in a commodity such as oil is not something that is suitable for those looking for a long-term method. The reason for this is again the price that can quickly go up and down.
Therefore, it is always best to use oil if you are looking for more short-term trading. You have probably noticed for yourself how petrol prices go up and down and it is thus oil prices that affect this.
It is not impossible to invest in oil in the long term. It certainly is not, but whether it is the most optimal is another question.
Here it is important that you choose a company that invests in long-term savings in the raw material, but then be prepared for a changed focus depending on how the oil industry will develop.
2. Buy oil shares on the stock exchange
How should you proceed if you want to buy shares in oil companies? The first step is to find companies where the focus is on the oil industry.
An example of such a company could be a business that supplies the oil industry with machinery or that works to extract oil fields around the world.
When it comes to oil funds and oil stocks, it is most common to invest in CFDs or ETFs.
I will go deeper into what this means further down in the text, but in simple terms it can be said that these methods are based on profiting from volatile prices.
However, futures and CFDs are the most common today.
3. ETFs in oil
It is not entirely uncommon to choose to buy “a warehouse” where all raw materials are in one and the same company.
I believe that this is not the best method, as it does not give you the opportunity to spread your risks and get a more balanced portfolio.
Through ETFs, you can instead spread your risk much better and this by investing in several companies in general, or by investing in several oil prices.
Which ETF you choose will form the basis for how your investment is structured.
ETFs are best suited for those who want the investment to be in the production of oil and not just in the oil price itself.
That said, it does not mean that you can not invest in the oil price with the help of ETFs. It is entirely possible, but the risk is still spread because you then buy the market index in the oil price instead.
This is a good choice for many people who want to be able to take advantage of all the investment benefits that oil has, but who also want to avoid the fees that come with CFD trading.
4. Invest in oil certificates
ETFs, CFDs, energy funds, stocks and more, but what is the easiest and easiest way to invest? According to experts, there is no doubt that oil certificates are the most flexible method.
Simply explained, it can be said that a certificate is a product that you can trade on the stock exchange and that makes it possible for you to take part in the oil price, without you actually having to buy shares in oil companies.
Certificates are also one of the cheapest ways to invest in the raw material.
The most notable fee that you will have is the one called the spread. In some cases, there may be an administrative fee, but far from always.
If you choose to use a broker, a brokerage fee may apply.
5. Shares in oil service
If you do not want to own an oil company that deals with drilling and exploitation, there are companies that sell “picks and shovels”.
Norwegian oil service maintains and services oil platforms, sometimes they also deal with transport between oil rigs.
It is important to remember that oil service companies are also governed by the oil price.
If the price of oil falls, the oil companies make less money, which means that the demand for oil service services decreases.
Therefore, shares in oil service go down when the oil price goes down.
Which investment method is best?
It depends on what your reason for investing in oil is. If you are a day trader or active investor and want to make money, both when the price rises and falls, you choose to invest through a CFD.
But if you invest in oil because you think they will increase more in a year, you should rather invest in ETFs, because you will probably pay a lower fee to own them.
Another option would be to buy shares in oil companies.
The advantage of buying shares is that you do not have to pay a fee to own them because you simply own a share in the company.
With an ETF, you only own a share of the ETF and because they have to make money, they charge.
You can also invest in other goods such as platinum, gold, silver, copper, wheat, sugar, cannabis and nickel.
If you have never invested in oil and want to get started, I recommend that you invest through a CFD where you set up automatic buying and selling.
This way, there is a limit to how much you can lose on investing and then you can learn more about how day trading works.
You can also invest in, for example, gold, currency and cryptocurrency.