Beginners Guide to Investing in Oil

One thing that is very true in life is that money breeds money, this occurs on a small scale and on a larger scale, it is a fact that the more money you have, the more you can make. There are countless ways that you can make money if you have it, high interest savings accounts, high roller gambling, real estate and trading stocks are just some ways that you can go about it. Recently however I have been working with the JBH Consulting Group and investing my cash in oil. Now, before I started, I wasn’t entirely sure how the whole thing worked, I had a good understand of stocks and shares but had never dabbled with oil or futures contracts. If investing in oil is something that you’d like to get involved in then here are some tips to help you get started.

Dealing With Fluctuations

Such are the economic and political factors attached to the oil industry, the prices of oil can rise and fall dramatically in just a day, this is something that you will need to get used to from the start. The World demand for oil is around 86 billion barrels per day, so you can understand that with that much demand, the market has the potential to very erratic. Price changes can occur if production levels fall, oil quality is poor or if government subsidies kick in and heighten demand. The key to oil investment is patience as the prices rise and fall.

Learning About Futures

You will hear a lot of talk about oil futures contracts, these are contracts that are traded as a financial instrument that, essentially, predict the cost of oil in the future. To better explain here is an example, let’s assume that you buy a futures contact that expires in August 2017, the current oil cost is $53 per barrel and the futures contract predicts a price of $62 per barrel when it expires. If you believe that the cost of oil will rise by more than $62 per barrel then you should buy the contract. If, when August 2017 comes around the price of oil is $74 then you have security with your contract of being able to buy oil at the price on your contract. If the price falls below $62 then all you have done is guaranteed that price for yourself. Learning about futures can make you a great deal of money.

Different Ways of Investing

Investing in oil doesn’t always have to be an investment into the companies who drill and refine crude oil, you can also look at investing in energy suppliers who’s prices also move with oil price fluctuations. You could invest in futures or you could invest in hedge funds or private portfolios that invest money into a wide range of oil related businesses. There is lots of choice out there for the would-be trader, you just need to do your research and start out small whilst you learn what you are doing.

Written by Harry

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