Why Investors Should Invest in Crude Oil Stocks in 2019
Nothing in this article is to be considered legal, tax or investment advice. Please consult with your attorney and tax professional.
Oil investments, and the global oil market is mountainous. Every day, the industry produces over 98 million barrels of crude oil from the ground. Currently, a barrel of oil is priced at approximately $70. The global oil trade records a whopping 2.5 trillion dollars per annum, an amount that is more than the value of all the raw materials on the market, and ten times bigger than the size of the gold market. Given the criticalness of the oil market to the economy, investors need to understand how it operates.
As an accredited investor, it is imperative to express your views about the movement of oil rates by buying oil stocks from firms that are significant players in the value chain. These companies include trusts companies, oil refiners, drillers, companies that provide transportation services, and oil marketers. Alternatively, you can purchase exchange-traded notes or exchange-traded funds.
As an accredited investor, it is imperative to express your views about the movement of oil rates by buying oil stocks from firms that are significant players in the value chain. These companies include trusts companies, oil refiners, drillers, companies that provide transportation services, and oil marketers. Alternatively, you can purchase exchange-traded notes or exchange-traded funds.
What Is Exchange Traded Notes and Exchange Traded Funds?
An exchange-traded note (ETN) is an unsecured debt security that an underwriting bank issues to an individual or company. ETN has a maturity date and is guaranteed and witnessed by the issuer’s credit. On the other hand, an exchange-traded fund that monitors a commodity, stock index, assets, and bonds. However, exchange-traded are different from mutual funds because they trade like ordinary stocks.
In the first quarter of 2018, oil stocks prices were more than double the rates recorded in 2016. Experts believe in 2019, prices for oil stocks will increase. So, this is the best time to invest in oil stocks. This guide provides details on ways to invest in stocks, and share some tips on how to do it professionally.
In the first quarter of 2018, oil stocks prices were more than double the rates recorded in 2016. Experts believe in 2019, prices for oil stocks will increase. So, this is the best time to invest in oil stocks. This guide provides details on ways to invest in stocks, and share some tips on how to do it professionally.
The Conservative Play
Many conservative investors who are new to the energy sector frequently invest in integrated oil stocks. What differentiates integrated oil producers from other energy firms is that the former carries out both upstream and downstream operations. Furthermore, integrated oil stocks have enormous dividends.
Refining stocks
Refining firms focus mainly on downstream operations. In other words, these companies neither explore nor produce oil. Although refiners are not oil producers, they play a crucial role in the pricing of crude oil, in the sense that oil rates rely on refining margins: they lower demand.
Independent Oil Companies
Independent producers do not carry out any defining activities. They are also smaller than integrated companies. However, there is a large pool of independent oil firms from which you can choose to invest; some have been performing exemplary over time. As a visionary investor, you must research which oil companies don’t pay dividends. Notably, some companies produce more natural gas than oil, and this has a significant impact on earnings, especially if the prices of natural gas fall.
Oil Services Stocks
Oil service firms are versatile as they carry out different activities including drilling activity, onshore and offshore rigs, and cement for oil wells. These firms do not produce oil but they are correlated with oil operations since their products and services are crucial to oil production. So, should analyze the global economic trends before investing in oil and gas stocks.
According to Barclays, the domestic industry has been facing stiff competition and downtime. Conversely, the international market is more promising since operators have projected a steep increase in capital expenditure budgets, in the future- meaning oil service firms are lucrative.
Many conservative investors who are new to the energy sector frequently invest in integrated oil stocks. What differentiates integrated oil producers from other energy firms is that the former carries out both upstream and downstream operations. Furthermore, integrated oil stocks have enormous dividends.
Refining stocks
Refining firms focus mainly on downstream operations. In other words, these companies neither explore nor produce oil. Although refiners are not oil producers, they play a crucial role in the pricing of crude oil, in the sense that oil rates rely on refining margins: they lower demand.
Independent Oil Companies
Independent producers do not carry out any defining activities. They are also smaller than integrated companies. However, there is a large pool of independent oil firms from which you can choose to invest; some have been performing exemplary over time. As a visionary investor, you must research which oil companies don’t pay dividends. Notably, some companies produce more natural gas than oil, and this has a significant impact on earnings, especially if the prices of natural gas fall.
Oil Services Stocks
Oil service firms are versatile as they carry out different activities including drilling activity, onshore and offshore rigs, and cement for oil wells. These firms do not produce oil but they are correlated with oil operations since their products and services are crucial to oil production. So, should analyze the global economic trends before investing in oil and gas stocks.
According to Barclays, the domestic industry has been facing stiff competition and downtime. Conversely, the international market is more promising since operators have projected a steep increase in capital expenditure budgets, in the future- meaning oil service firms are lucrative.
Rewards of Investing in Oil Stocks
Do you want to invest in oil stocks? here are reasons to invest in oil company stocks:
Return on Investment
Just like natural gas and petroleum stocks, energy stocks also attract massive investment because they have high returns on investment, although they are coupled with losses too. Growth in technology in the field of unconventional shale and drilling of fields have reduced risks and enhanced the dynamics considerably. Oil stocks rates usually record a steep rise, especially drilling that lead to the discovery of oil fields. These fields can last for a long time. In addition, profits start to trickle in within a year of exploration. The stocks provide a constant inflow of cash, but they also attract periodic losses.
Diversification
Oil stocks provider investment opportunities for accredited investors, against the economy. When oil and gas prices increase, the economy may slow down, resulting in losses for other types of stocks. Therefore, to equate the outcome of economic decline, consider investing in oil stocks for stability. Additionally, it offers some protection against inflation and ever-changing market conditions.
Trends to watch out for when purchasing oil stocks
Before buying stock in oil, you need to know the three most crucial trends, with the most obvious one being the price. The second trend is the behavior of oils stocks and S&P 500. The last trend is assessing the best investment class out of the ten in the oil space.
The situation of the three trends as of 2018:
Price- on Feb. 13, oil price hit a short-term closing low. But since then, the price of light sweet crude oil has shot up.
S&P 500 and oil stock behavior- the oil stock field has held gains of approximately 5%, and the estimate remains the same in the first quarter of 2019. Conversely, the S&P has recorded a decline of 2%.
Best performing groups- international explorers have proved to be the best performers with a record growth of 14%, US. Explorers 13%, drillers, 14%, and field services, up 14%. Pipeline group recorded a decline of 9%, making it the worst performer.
The third trend is especially crucial since as an investor, you can be right about the oil field, but you can incur a loss if your projections are wrong.
Consider Market Research Before You Invest in Crude Oil
Before buying any oil instrument, ensure that you study the asset in question. Policy changes play a crucial role in oil instruments. Therefore, be vigilant on political situations and policy changes to make the most out of it to deter significant losses.
Oil stock rates are incredibly volatile and rely on different factors. In spite of the effort to embrace renewable energy, there is still a high demand for oil. Although oil stocks attract some risks, there is potential for high returns on investment. Furthermore, it allows for diversification to the investor’s portfolio. Lastly, ensure that you carry out risk management strategies to manage the risks.
Before you invest in gas and oil, consult an expert for advice. You can contact United Exploration for more information.
Return on Investment
Just like natural gas and petroleum stocks, energy stocks also attract massive investment because they have high returns on investment, although they are coupled with losses too. Growth in technology in the field of unconventional shale and drilling of fields have reduced risks and enhanced the dynamics considerably. Oil stocks rates usually record a steep rise, especially drilling that lead to the discovery of oil fields. These fields can last for a long time. In addition, profits start to trickle in within a year of exploration. The stocks provide a constant inflow of cash, but they also attract periodic losses.
Diversification
Oil stocks provider investment opportunities for accredited investors, against the economy. When oil and gas prices increase, the economy may slow down, resulting in losses for other types of stocks. Therefore, to equate the outcome of economic decline, consider investing in oil stocks for stability. Additionally, it offers some protection against inflation and ever-changing market conditions.
Trends to watch out for when purchasing oil stocks
Before buying stock in oil, you need to know the three most crucial trends, with the most obvious one being the price. The second trend is the behavior of oils stocks and S&P 500. The last trend is assessing the best investment class out of the ten in the oil space.
The situation of the three trends as of 2018:
Price- on Feb. 13, oil price hit a short-term closing low. But since then, the price of light sweet crude oil has shot up.
S&P 500 and oil stock behavior- the oil stock field has held gains of approximately 5%, and the estimate remains the same in the first quarter of 2019. Conversely, the S&P has recorded a decline of 2%.
Best performing groups- international explorers have proved to be the best performers with a record growth of 14%, US. Explorers 13%, drillers, 14%, and field services, up 14%. Pipeline group recorded a decline of 9%, making it the worst performer.
The third trend is especially crucial since as an investor, you can be right about the oil field, but you can incur a loss if your projections are wrong.
Consider Market Research Before You Invest in Crude Oil
Before buying any oil instrument, ensure that you study the asset in question. Policy changes play a crucial role in oil instruments. Therefore, be vigilant on political situations and policy changes to make the most out of it to deter significant losses.
Oil stock rates are incredibly volatile and rely on different factors. In spite of the effort to embrace renewable energy, there is still a high demand for oil. Although oil stocks attract some risks, there is potential for high returns on investment. Furthermore, it allows for diversification to the investor’s portfolio. Lastly, ensure that you carry out risk management strategies to manage the risks.
Before you invest in gas and oil, consult an expert for advice. You can contact United Exploration for more information.
Note: nothing in this article is to be considered tax or investment advice. Please consult with your attorney and tax professional
