Do you remember the time when the price of oil was at $30 per barrel? That was not too long ago and it was around in 2004 when the price of oil in the world market started to increase in a dramatic way. In 2008 it reached $150 per barrel which was unthinkable decades ago. It started to stabilize and is now back in the $50 to $70 range which is just right. The thing is that analysts don’t see the price of oil going back down. The tendency is for oil prices to rise again. Experts are predicting that we might possibly see new record prices in the future. With most of the oil producing countries in trouble then we are likely to have the supply getting smaller with each passing year.
This expected rise on the prices of oil has some good side to it. We can start investing on oil to take advantage of the future prices. If you want to find the best way to invest in oil hen let us take a look at some of the possibilities:
Futures- These are contracts on the future prices of oil. If you want to try out this kind of investment then you would have to go to a trader that deals exclusively with futures and they are different from regular brokers. A contract would involve a thousand barrels of oil. If the current price of oil is at $50 per barrel then you are talking about an investment that is worth $50,000. The large amount needed for an investment makes trading with oil futures not ideal for small time investors who has a limited amount of capital.
Exchange Traded Funds- This is a great way of putting your money on oil. Oil ETFs invests heavily in oil and any changes on the price of oil on the world market will reflect on the ETF. This is actually a better and more realistic way of oil investment for people with limited capital. There is minimum set on the amount of shares that you can purchase from ETF and you would benefit in the same way on the price fluctuation of oil on the world market.
Another great thing about ETF is that you can also benefit from the falling prices of oil. If you believe that the price of oil will be falling then you can buy inverse oil ETF.
Common Stock- Another way of investing on oil is by using the common stock of companies that deal with oil. The prices of these stocks will rise and fall in close conjunction with the world price of oil. You can make money from this when the price of the oil and the share increases and when the company pays dividends to the investors. Some of the companies that trade in oil includes Exxon, BP, and Chevron.
Oil is one of the most important commodities in the world today. Take advantage of the opportunities that are open right now with the changing price of oil in the market.