[Closed] How to invest in oil?

[i] the obvious point that the oil would need to be stored somewhere[/i]

I think you've misunderstood the market.

People aren't buying oil and stockpiling it - they buy futures on oil that's still in the ground by taking a bet on what price it will get at the point of extraction.

I think you've misunderstood the market.

People aren't buying oil and stockpiling it

Well, some are but this

they buy futures on oil that's still in the ground by taking a bet on what price it will get at the point of extraction.

would be a better bet. Very high risk though.

Invest in an oil company.

they buy futures on oil that's still in the ground by taking a bet on what price it will get at the point of extraction.

would be a better bet. Very high risk though.

I would like to be able to buy some oil now at $40/barrel and be able to sell at an undisclosed point in the future when oil hits, say, $80/barrel.

Invest in an oil company.

Invest in an oil company.

But oil company shares wouldn't double if the price if oil doubled.

As above, I would like to be able to buy some oil now at $40/barrel and be able to sell at an undisclosed point in the future when oil hits, say, $80/barrel.

BP & Shell currently have dividend yields of over 7% - it's not guaranteed but that's a good return on any investment. If the oil price increases then the share price should rise as well.

[url= http://www.investopedia.com/articles/active-trading/092414/how-buy-oil-options.asp ]http://www.investopedia.com/articles/active-trading/092414/how-buy-oil-options.asp[/url]

[edit] Having understood all the words but not necessarily the meaning of the complete sentences in that article I'd be steering clear.

[edit2] This might be an important paragraph:

"Traders who do not wish to bother with physical delivery"

[i]As above, I would like to be able to buy some oil now at $40/barrel and be able to sell at an undisclosed point in the future when oil hits, say, $80/barrel. [/i]

Even if I knew how to do this, would I tell anyone? 😉

A lot of oil companies are close to the wall at the moment, plummeting oil price means that many are making losses on the expensive business of extracting it and are going bust, so its a big gamble to choose one you think will ride out the current low prices, $20 a barrel anyone?

BP & Shell currently have dividend yields of over 7% - it's not guaranteed but that's a good return on any investment.

I know nothing about investing in oil.

...And yet, because you "think" the price is wrong, you're willing to bet the house...my advice would be Do not invest in oil.

If you must, then at least do some research, talk to an investment broker, or to a commidity broker (if they'll even talk to random members of the public), tell them what you want to do, and follow their advice

Most CFD platforms allow you to invest in oil etc. I eventually settled using CMC Markets platform....

...And yet, becuase you "think" the price is wrong, your willing to bet the house...my advice would be Do not invest in oil.

If you must, then at least do some research, talk to an investment broker, tell them what you want to do, and follow their advice

Have a look at Plus500

oil company you mean Exploration - or Production - and/or refining?

Pretty sure you could invest in the sector as a whole too. Which removes political volatility over individual oil cos. Or cover service companies as a back-stop (Wood Group, Schlumberger).

I suspect even if oil prices ride, there will be a lot of futures positions to be unwound before anyone really makes a profit. That's someone else, not you!

Most CFD platforms allow you to invest in oil etc. I eventually settled using CMC Markets platform....

Have a look at Plus500

This presumably carries the risk that the individual company invested in does not perform well for reasons separate from oil price?

So buy shares across a spread of companies, Shell, BP, ExxonMobil, Statoil, etc.

But oil company shares wouldn't double if the price of oil doubled.

You'd be surprised, some will some won't. Have a look at how they've reacted historically and there's more to it than just oil price. For example a cut (or rise) in the dividend can have a huge impact. As will their oil reserves, Shell took a hammering when they revised down their estimated reserves, likewise a small exploration company might double (or 10x, 100x) overnight if it finds new reserves. But that requires a lot more knowledge than just "oil is low, I should buy some".

As above, I would like to be able to buy some oil now at $40/barrel and be able to sell at an undisclosed point in the future when oil hits, say, $80/barrel.

You and everyone else, but you can't (unless you own a huge tank somewhere to keep it in like the Saudi's). You can buy futures, but your idea isn't novel so you may struggle to get as good a price as you seem to think. The future price 10 years from now is currently hovering around $60/barrel, so that's already eroding your profit somewhat.

http://www.barchart.com/commodityfutures/Crude_Oil_WTI_Futures/CL

If I had any money and had to invest it in 'oil', I'd look at some of the engineering companies (AFW, Fluor, ENI, MWK, KBR, Mustang), their shares are taking a hammering at the moment as work dries up as the market is more cyclical than the operators, which means at some point next year it's going to hit rock bottom, then climb again.

Plus500 usually does a free trial period and you can dabble with pretend money. Commodities you buy at a future value, so if everyone thinks its going up thats the price you'll pay. Stocks are companies at todays prices they'll do well or not for all the usual reasons.

Decide your risk appetite first then

Low risk - high dividend, equity as ^ through
High risk - oil options

Spread bet on oil price in the middle (City Index etc)

How good is your inside track on Saudi policy? 😉

You and everyone else, but you can't (unless you own a huge tank somewhere to keep it in like the Saudi's). You can buy futures, but your idea isn't novel so you may struggle to get as good a price as you seem to think. The future price 10 years from now is currently hovering around $60/barrel, so that's already eroding your profit somewhat.

So buy shares across a spread of companies, Shell, BP, ExxonMobil, Statoil, etc.

You'd be surprised, some will some won't. Have a look at how they've reacted historically and there's more to it than just oil price. For example a cut (or rise) in the dividend can have a huge impact. As will their oil reserves, Shell took a hammering when they revised down their estimated reserves, likewise a small exploration company might double (or 10x, 100x) overnight if it finds new reserves. But that requires a lot more knowledge than just "oil is low, I should buy some"

$80 (real) seems high to me. Might go lower than it is now but $50 could be a fair price for a while longer. Emerging market demand growth is nothing like it was and in the west (I think) we're at or close to peak oil demand. Not too hard to see a scenario in which emerging market demand growth is no longer enough to offset shrinkage in the west - global peak oil demand. On the supply side I think OPEC have backed themselves into a corner. US unconventional oil is suffering now but works at a lot lower prices than OPEC were hoping. Could ultimately see a price ceiling at US tight oil levels - as long as demand stays weak.

Look at the share price of BOR (borders and southern) or CHAR (chariot oil and gas) over the last few years if you want to see an example of lots of people losing a lot of money very quickly indeed!

BOR went from over a £1 a share to about 3p in 3 years :-/

[img] [/img]

$80 (real) seems high to me. Might go lower than it is now but $50 could be a fair price for a while longer. Emerging market demand growth is nothing like it was and in the west (I think) we're at or close to peak oil demand. Not too hard to see a scenario in which emerging market demand growth is no longer enough to offset shrinkage in the west - global peak oil demand. On the supply side I think OPEC have backed themselves into a corner. US unconventional oil is suffering now but works at a lot lower prices than OPEC were hoping. Could ultimately see a price ceiling at US tight oil levels - as long as demand stays weak.

"Look at the share price of BOR (borders and southern) or CHAR (chariot oil and gas) over the last few years if you want to see an example of lots of people losing a lot of money very quickly indeed!

BOR went from over a £1 a share to about 3p in 3 years :-/"

I remember that , i remember them releasing speculative press releases and everyone jumping in sinking a pile of money into them. then they drilled and found **** all.

I do remember the folks in my office(oil and gas) who had more than a passing interest in the share markets saying you would need to be mental to invest in those companies..... and sure enough.

there was rockhopper as well.....nothing more than a gamble - the oilfield equivalent of kickstarter if you will.

You want to bet on oil, look into the futures market. You want to invest in oil, buy BP and/or Shell etc shares. I know which I would rather do (and in fact have).

I've got a massive pond in my yard, and I filled it up with 80,000 barrels of crude, purchased at the wholesale price.

sweet black gold, I go swimming in it.

for. furjs. sake.

Buy lots of tankers, fill with oil, store in a back yard, sell when you think you've hit the top of the curve.

HTH's

Saudi's produce oil at $10 a barrel, they can stick this out a while longer (even though they are spending reserves to meet budget expenses) and its a stand off between them and US shale producers who the Saudis are trying to force out of the market / bankrupt them. Plus with China and Indian economies slowing the demand for oil has dropped. Complex arguments.

OP yes there are oil ETF's (which generally hold shares) and yes you can buy oil company shares directly. You can "bet" too as tmh says. My 6 pence would be to buy oil company shares as the lowest risk.

From time to time people do play oil by buying tankers full but its a complex way to do it fraught with many technical risks so they generally use futures or other derivatives.

BP & Shell currently have dividend yields of over 7% - it's not guaranteed but that's a good return on any investment. If the oil price increases then the share price should rise as well.

For how long though, FTSE 100 companies are ditching dividends like never before...

Bonfire of the dividends

In an average year, you might expect only two, three, maybe four FTSE 100 companies to cut their dividends. There is always a crisis somewhere, but dividends, according to traditional boardroom thinking, are sacrosanct until the management has exhausted all other options to save cash or restore earnings.

By that yardstick, 2015 is turning out to be the year of the bonfire of the dividends. Barring a miracle, Anglo American will today become the eighth FTSE 100 company to announce a cut, following Antofagasta, Centrica, Glencore, Morrisons, Sainsbury’s, Standard Chartered and Tesco. That’s a long list.

Of course, there are counterbalancing tales. Some of the other 92, such as Next and ITV, continue to spit out special dividends, and the FTSE 100’s crew of housebuilders – Berkeley, Barratt, Persimmon and Taylor Wimpey – are in a race to see how much capital they can return, and how quickly.

But eight divi-cutters in a year feels like a turning point of some sort for a six-year-old bull market. As for next year, current high yields suggest the market also questions the medium-term sustainability of dividends at a further seven companies, some of them biggies: Aberdeen Asset Management, BHP Billiton, BP, GlaxoSmithKline, Pearson, Rolls-Royce and Shell. Worrying.

http://www.theguardian.com/business/nils-pratley-on-finance/2015/dec/07/saudi-arabias-640bn-dollar-question-oil-price

Oil Traders don't trade flat price by the way. Meaning they dont generally trade on the outright direction of prices, but on the spread or differential between either physical delivery locations or on the cost of receiving and storing the oil versus what level they can hedge the selling price at a given time in the future.

All these posts about oil company profits and nobody has mentioned "crack spread"?

get some guns, get some friends (lots of them) and give them guns too, dress in black, justify your existence by twisting some normal ideology, take over a middle eastern country and sell the oil to everyone who comes after you...simples(!)

All these posts about oil company profits and nobody has mentioned "crack spread"?

I almost did, but:
a) I think it's going to go down soon
b) I'd have to explain it

[quote=gonzy spake unto the masses, saying]get some guns, get some friends (lots of them) and give them guns too, dress in black, justify your existence by twisting some normal ideology, take over a middle eastern country and sell the oil to everyone who comes after you...simples(!)

In the absence of sufficient suitably qualified friends, enlist the help of a conveniently located elite military unit who have recently been humiliated and impoverished following the antics of 2 grinning politicians. Success!!

OPEC historically have reduced production to keep oil prices high. They are now allowing the price to drop...a first.

This is probably due to:

Wanting to reduce viability of gas and oil from Fracking, Shale/tar sands and discourage investors from that market.

Maintain maximum appeal of petrol/diesel vehicles to slow the inevitable bias towards electric/hybrid vehicles.

Compete with the US domestic oil production.

So it could be that OPEC keeps supply high for the long term and keeps oil prices at a more competitive level. Don't think I'd invest.

Don't do it.

Our company made some decent money from buying shares then selling them off when they were higher in value. But we had personal knowledge.

The paid "experts" we also consulted basically talked a lot but none of it made any real sense. They also offered advice after our deals were done, so I made a note of it and later compared them to reality with a view to seeing if it would have been worth paying for their advice later on.

None of the actual advice you could distil out of the nonsense they spouted came anywhere near the reality.

There are some very clever and well connected people in a highly competitive fast moving market for this sort of thing. Most of them don't make money, the money some of them make comes from selling normal people crap advice.

Its basically gambling. On average you will lose, or if you are lucky, make a tiny bit of money for large risk.

Its a bit like turning up at a world cup DH race and giving it a go. Sure, you ride a bike and can watch all the YouTube vids of how its done. But you are not even going to qualify.

If you don't know anything about the market and don't know actually how to physically invest your money then that is a sure sign you should not be investing.

Oil prices are not guaranteed to rise any time soon and with the current state of production my personal advise would to steer clear.

I work quite closely in oil rights and with the advances in extraction technology coupled with predicted continued low demand for oil the price is going to be volatile and unpredictable for some time.

I invested in a company about 3-4 years ago. Word was they were waiting for go ahead at which point their value was going to rocket by a factor of 8 by some estimations. I knew their go decision hadn't come yet but only checked on their value last week - they've reduced 91.5%. I didn't invest a silly amount but relatives of my pal who'd told me about it had sunk 10's of 1000's.

Anyway, invest in an oil company that's big on renewables development. I Think Shell are but they're mainstream. Alternatively invest in a renewables fund for the longer term.

Options are highly geared so you could lose everything you put in.

CFDs trade on margin & carry the higher risk that you could lose more than you originally put in, as well as being highly geared.

Oil companies' pricing varies according to oil reserves (falkland oil & gas), environmental disasters (BP), dodgy governments (Sibir Energy) & general market sentiment. The bigger ones will generally give you a yield in the interim period.

Best way to invest in pure commodities is ETFs, but beware of management fees from your platform & AMC from the fund manager. Cheaper than storing 1250 barrels of oil or 3 tonnes of lean hogs though.

You should also bear in mind that oil is priced in USD, so you're also exposed to a bit of FX risk.

Final tip: don't take investment advice off strangers on the internet.

Our company made some decent money from buying shares then selling them off when they were higher in value. But we had personal knowledge.

Also known as insider trading?

An acquaintance of mine has recently retired off the back of his staggering gains in Dragon oil.

i on the other hand lost a decent amount over the last few years investing in shit companies in a market i knew nothing about.

Unless you know the next Dragon oil I wouldn't bother.

https://soundcloud.com/richge/the-great-hargeisa-goat-bubble

In the absence of sufficient suitably qualified friends, enlist the help of a conveniently located elite military unit who have recently been humiliated and impoverished following the antics of 2 grinning politicians. Success!!

that'll work too!!