Oil Investing
Oil is one of the most vital commodities known to man. Powering essential items such as cars, planes and trains. It produces items such as plastic and petroleum jelly. It represents an intrinsic part of modern life.
Presently the price of oil is volatile due to the current conflict in the Middle East. The overall trend is up with some analysts mentioning $100 a barrel.
Oil is traded on world commodity markets. Speculators buy and sell Futures contracts predicting the future price of oil. It is a highly volatile method of investment but can reap huge rewards. However 90% of those investing in the Futures market lose money.
There is a well respected theory that oil reserves have peaked, this along with the current high cost of crude oil has driven investments in alternative fuels and efficiencies in engines using petrol and diesel oil.
Oil is a huge market and represents excellent investment opportunities both in the commodities market and trading the shares of companies within the oil sector.
When investing in Oil companies it is important to know exactly how much oil is in their reserve.
The share prices of companies like the massive Oil Group Royal Dutch Shell, can take a tumble if they are over optimistic about the amount of oil they can extract. When Shell revealed that it had miscalculated it’s oil reserve by 3.9 billion barrels the shares fell by over 7%.
Whilst China continues its production demand it will continue to buy up oil, thus keeping the price high. Although oil is at a high, it has not reached the peak of the 1970’s oil crises. The situation today is more positive with investment pouring into harder to extract reserves, coupled with the fact that the market is more efficient. Making an oil fuelled recession unlikely.
However, if the Middle East continues to be volatile and China keeps up with demand, we can foresee a continuing high for the price of oil.
