Expert Tips on How to Invest in Oil and Gas and Factors to Consider Before You Do
The following article is one opinion and does not constitute investment advice.
Over the past decade, the oil and gas industry has gone through many changes. Before the internet was discovered, buying and selling of minerals were done through word of mouth and networking. Major players in the industry including CEOs, brokers, business development experts, and investors, would attend every social circle, meeting and discussing businesses with potential buyers and sellers.
The internet gave birth to social media marketing and internet-based firms, which improved buying and selling of oil and gas. Today, you can secure deals easily and close them faster. This also means there is no sufficient time to evaluate business transactions. As a result, it has increased risks, especially on the buyer’s side.
The internet boasts of numerous comparable platforms that buyers can use to compare different offers. With many businesses under the same roof, competition is ugly. While the internet has made things easier for buyers, it has also created many avenues for sellers. With uncountable websites to choose from, finding the right information on how to invest in oil and gas has become a daunting task.
That is not all; most information out there is scanty and unfounded. However, this guide shares critical information for those who want to invest in oil and gas. Here, you are going to learn about factors to consider before you invest and how to invest in oil and gas.
The internet gave birth to social media marketing and internet-based firms, which improved buying and selling of oil and gas. Today, you can secure deals easily and close them faster. This also means there is no sufficient time to evaluate business transactions. As a result, it has increased risks, especially on the buyer’s side.
The internet boasts of numerous comparable platforms that buyers can use to compare different offers. With many businesses under the same roof, competition is ugly. While the internet has made things easier for buyers, it has also created many avenues for sellers. With uncountable websites to choose from, finding the right information on how to invest in oil and gas has become a daunting task.
That is not all; most information out there is scanty and unfounded. However, this guide shares critical information for those who want to invest in oil and gas. Here, you are going to learn about factors to consider before you invest and how to invest in oil and gas.
Factors to consider in oil and gas projects
Sadly, the oil and gas industry has had its fair share of scams. Moreover, because the sector presents some alluring opportunities for everyone, scam artists have surfaced to steal from unsuspecting and uninformed individuals.
If you are looking for accredited investor investment opportunities and would like to invest in oil and gas, you should review the Securities and Exchange Commission’s guidelines on oil and gas investment. However, most of the information therein is common. For instance, you should know the person or company you are transacting with. Ask for references and carry out a background check on them before entering into any agreement.
Just like any other business, oil and gas investment has its own set of risks. So, any person who claims to be legitimate has to be handled with much skepticism first, to be sure they are not counterfeit. You cannot afford to invest in a loss.
If you are looking for accredited investor investment opportunities and would like to invest in oil and gas, you should review the Securities and Exchange Commission’s guidelines on oil and gas investment. However, most of the information therein is common. For instance, you should know the person or company you are transacting with. Ask for references and carry out a background check on them before entering into any agreement.
Just like any other business, oil and gas investment has its own set of risks. So, any person who claims to be legitimate has to be handled with much skepticism first, to be sure they are not counterfeit. You cannot afford to invest in a loss.
Book an appointment to learn about oil and gas investment
The North American Securities Administrators Association (NASAA) has crucial information that can help you. You should be confident that any investment you make is handled separately, and your money is put in an escrow account, because it may be used to cater for other bills such as salaries and advertising.
Also, it is essential to know who is in charge of the funds and this individual must be very disciplined and ethical. One way to avoid scammers is by talking to those who are in charge of the operation. Shy away from people who pressure you into signing deals that you have not researched about.
Contact an oil and gas investment adviser at United Exploration by calling (682) 651-1629
Also, it is essential to know who is in charge of the funds and this individual must be very disciplined and ethical. One way to avoid scammers is by talking to those who are in charge of the operation. Shy away from people who pressure you into signing deals that you have not researched about.
Contact an oil and gas investment adviser at United Exploration by calling (682) 651-1629
How to invest in oil and gas
Purchase Oil Futures
Gas and oil futures are similar to stock options in the sense that they act as securities that give a person the right to buy oil at a given rate. If you trade your future by the agreed date, you can buy oil at the settled price in the futures contract. If oil price is expected to rise, you can hold the futures and wait for the value to appreciate, and sell it at a profit.
Oil futures are available in two primary exchanges: the Intercontinental Exchange (ICE) and New York Mercantile Exchange.
Oil futures are available in two primary exchanges: the Intercontinental Exchange (ICE) and New York Mercantile Exchange.
Purchasing oil futures from NYMEX
NYMEX is a platform for trading futures exchange. The CME Group operates the platform at its offices in Chicago. However, the main headquarters of the NYMEX is in New York. The ticker symbol for Nymex oil is CL. With CL, an investor can purchase up to 1000 barrels of oils. NYMEX allows you to settle oil contracts either through cash or physical delivery, although cash transactions are standard here.
Buying oil futures from ICE
The headquarters of ICE is in Atlanta, Georgia. The platform handles oil futures electronic transactions. Oil contracts in ICE have a ticker symbol of B and use Brent Crude benchmark. The platform allows a buyer to purchase up to 1000 barrels of oil. Contracts are commonly settled in cash. However, the physical exchange is also allowed
When it comes to oil, NYMEX and ICE differ in benchmarks used. West Texas Intermediate hails from Gulf Coast and American Midwest. It has less sulfur than other parameters. On the other hand, Brent Crude hails from the North Sea, in the UK.
While trading oil futures is a lucrative venture, keep in mind oil is extremely volatile and sensitive. Not only that, oil is fungible too. Thus a single event in one part of the world affects oil prices in other places. So, ensure that you grasp the dynamics of the oil futures market watch, and be ready to take risks to turn your investments into profit before joining the futures market.
When it comes to oil, NYMEX and ICE differ in benchmarks used. West Texas Intermediate hails from Gulf Coast and American Midwest. It has less sulfur than other parameters. On the other hand, Brent Crude hails from the North Sea, in the UK.
While trading oil futures is a lucrative venture, keep in mind oil is extremely volatile and sensitive. Not only that, oil is fungible too. Thus a single event in one part of the world affects oil prices in other places. So, ensure that you grasp the dynamics of the oil futures market watch, and be ready to take risks to turn your investments into profit before joining the futures market.
Consider investing in energy ETFs
If you are starting, mutual fund and oil commodity exchange-traded fund is the easiest and less risky approach to oil investing. With basic knowledge, you can review the holdings in oil ETF and see if they fit your needs. Note, oil ETFs vary, some do not offer dividends, while others flounder them generously. Others invest in oil futures only, while others invest in oil company stocks.
The United States Brent Oil Fund
The United States Brent Oil Fund is also called BNO. The ETF is designed to monitor fluctuations in Brent crude oil prices. The ETF’s fund operates on the BNO Benchmark Oil Futures contract. It also features Brent crude oil futures contracts that trade on ICE futures exchange. Money raised from the fund is usually invested in Brent crude oil futures contracts.
The vaneck vectors oil refiners
Also referred to as CRAK, the ETF garnered a whopping 36.57% for the year ended February 22, 2018. CRAK uses an index model designed to imitate MVIS Global Oil Refiners Index returns. The weighted index is not only rules-based, but it is also capitalized. It is monitors performance of firms dealing with oil, jet fuel, diesel, and gasoline production.
The DB oil fund
The index fund monitors the DBIQ Optimum Yield Excess Return Crude Oil Index. The fund operates on the West Texas Index (WTI) futures contracts, and the net assets are invested in West Texas Index oil futures. For the business year ended, February 22nd, 2018, the fund’s ROI was 13.87%. Apart from WTI, the fund also has interests in the Premier US Government Money Portfolio and, the US Treasury Bills, and the PowerShares Treasury ETF.
Join a master limited partnership (MLP)
The master limited partnership is quite lucrative but complicated. The Internal Revenue Service requires seasoned investors to explain their business model and report their profits and losses. The success of the fund relies on shared interests of both the general and limited partners. The shares from the limited partners are meant to shield investors from loses. Joining a master limited partnership will give you some idea of what to expect, risks that are involved in the business, and who your partners are.
Invest in a private placement oil fund
If you are interested in oil investing and possess the right accredited investor qualifications, then this is the right investment opportunity for you. To get started, you need help from a reliable partner such as United Exploration to help you invest your money wisely. You can contact United Exploration for more information.
However, you should note nothing in this article is to be considered tax or investment advice. Please consult with your attorney and tax professional.
However, you should note nothing in this article is to be considered tax or investment advice. Please consult with your attorney and tax professional.
