Predicting oil prices is pretty difficult because of its high-end volatility. But, if you get to contact the US Energy Information Administration, you still have some possibilities to get proper information.
Now, you must know How to Buy Oil Stocks. For that, getting accurate steps is mandatory.
Best Ways to Buy Oil Stocks When Price is Low:
There are mainly five different ways in which you can trade oil. So, that helps in answering your question on how to buy crude oil stocks and invest in for a better return on investment. Let’s get into details.
Invest in Oil Stocks Through CFDs:
Primarily defined as Contracts for Difference, it is one major answer to the question on How to Buy Oil Stocks with very little money in stock. You will be speculating on the oil price difference and not buy it itself. One major advantage of this point is leverage.
On the other hand, CFD trading will not provide you with any form of commission as the brokers will get profit from the spread.
Moreover, CFD trading is available for its flexibility. While any standard oil futures will be of a contract of 1000 barrels, CFD can help you trade in smaller sizes of around 25 barrels. Being leveraged product, however, the risk of losing invested capital is also magnified. So, before you get an answer on how to buy crude oil, make sure to check the pros and cons of both.
Buy oil with Futures:
It is one of the direct ways associated with trading commodities, without running into purchasing actual barrels. Here, you get to purchase future contacts through the commodity brokers. Through Futures, you get the chance to purchase oil at a specified date in the future, within a pre-set rate.
With some people not having storage facilities and even some proper distribution channels, trading the oil future is the next step when it is about How to Buy Oil Stocks. There are some major specifications on trading on Futures.
There need to be 1000 barrels for WTI and Brent both. Both will be priced in US Dollars. The ticker symbol for WTI is CL, and that of Brent is BZ.
Trade the Oil Through ETFs:
Also known as Exchange-traded funds, ETF can be another interesting option while planning to buy oil stocks. Here, you get the opportunity to actually access different assets at the same time. So, ETF is perfect for diversifying your portfolio.
It can further help in removing all the major points to help you choose any one or multiple stocks for you to trade.
People are more interested in investing in commodity ETFs, especially the oil traders. They can buy and even sold ETFs as ordinary stocks. One major advantage of trading oil-based ETFs is that it can present you with diversification across various oil-based industries at a relatively lower rate.
If that wasn’t enough, ETFs could further help in avoiding any risk revolving around trading some of the volatile single stocks. Among the lot these days in 2019, the three best oil-based ETFs got to be United States Oil Fund or USO, Vanguard Energy ETF or VDE, and VanEck Vectors Oil Services ETF or OIH.
Investing in the Present Oil Shares
For another answer on how to buy stock in oil, especially crude oil, you can easily opt for trading the oil stocks. For that, you have to follow the global oil rates. Not only that, but you need to dig deeper into the protection potential of any chosen oil firm.
You need to understand the complete energy cycle and competitive market and further estimate the financial performance of the firms to distinguish some of the valuable assets.
In the USA, the major players in the world of crude oil production will be ExxonMobil. It is also targeted to be the largest oil refiner in the world with a processing capacity of around 6m barrels daily.
Ways to Buy Oil Through MLPs:
Apart from all the answers on How to Buy Oil Stocks, another interesting option in here to consider got to be the MLPs or the Master Limited partnerships medium.
Mostly noted as a public traded entity, MLP helps the oil investors to enjoy tax benefits of partnership alongside the liquidity of the current public traded stocks. Do checkout 3 best apps for stock investment in 2020.
If you are able to invest in crude oil-based MLP, you will stand in the position of a limited partner to receive a share of profits. Most of the time, these companies will specialize in the oil pipeline business. It helps in transporting commodities from one source to another.
So, there will be a difference in the performance level among multiple traditional based oil production stocks. But, there are some major areas that you need to keep track of if you plan to invest in oil MLPs. Those options are Marathon Petroleum’s master limited partnership or MPLX, Enterprise Product Partners or EPD, and Western Gas Partners or WES.
The Right Time to Buy Oil Stocks:
It is really hard to set a perfect time when you can invest in oil stocks. But, the price always remains a good indicator of when you need to invest in such assets and how to buy oil futures or through other mediums, as mentioned already.
In case you are making plans to invest in “blue chips,” then you can invest in it any time. For that, dividends and stability remain the major goal. But for “penny stocks,” it is always better to wait. Wait for the price to drop before making a decision.
Ask The Experts Always:
Whenever you make plans on buying oil stocks, go through some experts and get help from their sides. They know the right deal to follow and can serve you well. They are more than happy to help you work on the best oil stock assets ever.