How do you invest in oil?

MasterOfCoin

Well-known member
395 144
Well, the short answer to the question is, you don't.

Not unless you are willing to be knee deep in black smelly sludge, that is.

What you actually do is trade and invest in things directly or indirectly effected by the price of oil.

{ Yahh, the just about everything in use in the modern world we take for granted, lol, but for our purposes in this section, lets stick to the commodities and markets most closely associated. ]

So, you could for instance, directly invest in oil companies, in the expectation of good returns in a recovery.

Or, more relevant here, you could speculate on futures contracts and the fluctuating price over time.
But, seriously, that requires a lot of knowledge which your average home trader hasn't much chance of acquiring fast.

Or you could trade FX or deal in foreign currency day-by-day as events play out.


But the clear near-certainty is that the price WILL go up, that being paid to take oil away was an exceptional anomaly, and that there will probably not ever be another opportunity as good as this one to make money in your lifetime.

So, take a deep breath, and dive in !

:)
 

tomorton

Legendary member
8,095 1,196
There are differences between investing and trading as MasterOfCoin says above.

A key difference is knowledge. To invest in a sector you should have some specific knowledge that allows you to project what that sector is likely to do economically over a long time period. Hard to do if you're not a trained economist. Even then, at the point in time at which you are for unforeseen reasons compelled to sell, the price might be even worse than it is today - Google "Brown's Bottom".

The level of knowledge concerning the sector in trading can be (I won't say should be) zero. But you would need expertise in technical analysis of price charts etc. to inform your decisions and give you an edge. A hunch or common sense or past experience are not edges.
 
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yuriythebest

Junior member
19 3
I wanted to ask the same question but want to bump this instead.
If I want to invest medium/long term, what's the best thing to buy? I'm new to oil trading, so want to make sure I don't buy something silly such as a contract that will expire or get de-listed if a date passes or if the price drops low enough
Thanks in advance!

EDIT: So far after searching

iPath Series B S&P GSCI Crude Oil Total Return Index ETN = Redemption announced after apr 30th, no longer valid

ProShares K-1 Free Crude Oil Strategy ETF = seems good?
 
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MasterOfCoin

Well-known member
395 144
My advice remains the same.

To ensure you don't do something silly, then unless you are confident in your ability to expertly analyze and interpret technical data and/ or have a comprehensive understanding of the futures contracts involved, then do not trade oil.

Instead, with due diligence, invest in oil companies or secondary industries which are most impacted by fluctuating oil prices.
Even if you skipped the easy pickings of making profits on the wild daily/ weekly swings in their stock prices, you have a no-brainer win situation on the slightly longer term outlook when prices revert to more realistic values as oil consumption resumes to more normal levels.

Unless, that is, you believe that the world is flat, will remain in lockdown, everybody will abandon using their cars and we'll all go back to eating only locally produced food.

:)
 

Henow1969

Member
87 8
Investing in crude oil requires careful consideration because you have many different choices. Because crude oil is a physical commodity, directly investing in oil requires proper handling and management of the physical good, and that involves logistics that many traditional investors in the stock market aren't comfortable taking on in their portfolios.
 
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