Posted by Zoe Geoffrion , on Dec, 2016
As you consider the best way to invest in crude oil you have the options of purchasing direct from an oil producer, via a company quoted in the stock market or perhaps by investing in oil futures. Which is best for you and why?
Is Investing in Oil Futures Scary?
The best way to invest in crude oil is partly a matter of opinion, but also a good time to listen to professional advice. If your investments haven’t included the futures markets previously, this is far from standard investment procedures.
Essentially, when the price for oil gives the impression that it is going up, you can hold the commodity as a future trade so that while the value increases you can sell it on (for profit) at a later date.
You will be in good company because oil futures are extremely popular and form a large part of traded derivatives in the futures market.
This is mostly because an investment in oil futures has the potential to make significant profits. The trades tend to be large as investors claimed tens of thousands of dollars’ profit within a single trade. The price of oil, in previous years, used to vary considerably during even the shortest investment period.
Because a high volume of trade is active in the oil futures market, investors will be pleased with a liquidity that is unmatched by other commodities within the marketplace.
Nevertheless, there is a finite supply of oil as it is a resource that is not easily replaced, except maybe by waiting tens of thousands of years. As the resources gradually deplete, the price of oil will increase due to the basic laws of supply and demand.
Oil Prices May Become Volatile Again
As you wonder about best way to invest in crude oil you may be better off considering direct investments into companies that drill for oil, compared to the volatility that exists within the futures market and in particular, with crude oil.
Although prices may have settled during 2016, no one can realistically predict the price of oil next month or next year. The price can easily be affected by the discovery of new oil supplies around the world and while oil consumption looks to steadily increase in the future, environmental issues may slow down the consumption of oil across the world. Nevertheless, this is unlikely in the near future.
Investing in oil futures is not for the fainthearted. Where you wish to include oil futures as part of your portfolio, ensure that you take professional advice and set your risk involvement carefully.
What is the best way to invest in crude oil is a practical question for most investors? crudefunders.com will clarify how crowdfunding may be your best way to invest in oil.