TMCnet Feature
August 04, 2021

A Guide: Investing in Oil Stocks and Oil Stocks Trading



Oil is the most traded commodity in the world, and its price influences the global economy in so many ways. Investing in oil is a good idea although it includes many risks and benefits.oil prices are normally stabilized and also volatile at the same time. Day traders also prefer to invest in oil because of the high volatility.



In this article we tried to cover all the aspects of the trading. Shares of oil companies, like Shell stock, are very popular among investors. The abundance of oil has caused the price of oil to drop sharply and rise fast at the same time.

The Main Sectors of the Oil and Gas Industry

When it comes to stocks related to the petroleum sector, you will tend to think of companies engaged in petroleum production. This is not wrong, but the petroleum industry is not limited to this. Think, for example, of natural petroleum refining, petroleum vendors, or fossil fuel transportation companies. In summary, the various activities of the oil and gas industry are divided into three main sectors: upstream, intermediate and downstream. There are therefore a thousand and one ways to invest in oil.

Exploration & Production

The upstream sector is focused on exploration & production (E&P). The main objective of companies active in this sector is the detection and extraction of oil and gas. Existing underground oil and natural gas reservoirs are identified through analysis of the results of geological and seismic research. Indeed, specialized companies such as Fugro & Petroleum Geo-Services  focus only on finding exploitable sites. These companies collect data from the sea and land surface on which they base opinions, most often for clients in the oil and gas industry.

Some companies in this sector provide only the products and technical services necessary for the extraction of gas and oil. It is often a combination of labor and materials. Schlumberger, Baker Hughes (News - Alert) and Halliburton Company are a few well-known names in this industry.If you want to learn more about its trading you can check it by visiting Oil Profit.

Transport & Storage

The interim sector ensures the treatment, transport and storage of oil after its extraction. This sector is an important link that links the upstream sector to the downstream sector. Companies active in this sector collect raw materials and transport them through pipelines, trucks, freighters, tankers and freight trains to bring them to refineries. We are thinking here of the companies Scorpio Tankers and Enbridge Inc.

Preparation & Consumption

The downstream sector focuses on the refining of crude oil and the processing / purification of natural gas. Companies that are active in the sales and distribution of various consumer ready products also fall under this sector. Think here of gasoline, diesel, kerosene, plastic, lubricants and asphalt. Known examples are Marathon Petroleum, Valero Energy, Exxon Mobil and Phillips 66. 

Integrated oil company:

There are also companies with a portfolio of activities in both the upstream and downstream sectors of the industry. These are the integrated oil and gas companies, they take care of almost every aspect of the industry. These companies therefore play a role that ranges from discovery to distribution of oil and gas. Think for example of BP, ExxonMobil or Royal Dutch Shell. These are companies that, in addition to pumping oil, also sell it along highways.

Investing in Oil: Shares of Oil Companies

Investing in oil can be done in several ways, but the best way to invest in oil is through the broker eToro in our opinion. To do oil trading online, the process is very simple and easy 

However, the quickest and easiest solution is to invest in oil online . This can be done either through equities or through ETFs linked to the oil sector. Continue reading this article to learn the detailed steps for investing in oil.

What are the Shares of Oil Companies

There are two types of oil traded as a commodity on the financial markets. The most popular and traded type of oil in the world is American oil called WTI. Light Sweet Crude Oil (WTI) is widely used in American refineries and is one of the main benchmarks in terms of oil prices. A second type of oil is Brent. We find it mainly in Europe, Africa and the Middle East. This serves as a benchmark for crude oil. Brent is the name of an oil field in the North Sea.

You can therefore be exposed to the price of oil by investing, for example, in futures or ETFs. You can also try your luck by buying shares of solid oil companies which also pay a nice dividend. Certain stocks of oil companies are precisely less sensitive to fluctuations in the price of oil and therefore constitute a more defensive investment. This can be explained in particular by the fact that this type of company focuses on gas extraction or by a lower production price.

Conclusion

A good business analysis allows you to invest specifically in a certain activity in the petroleum industry. For example, you can opt for stocks from an oil producer or a pipeline supplier. But never jump straight into the trading, always study the market, check out the trends and follow the trend. If you are new and do not know much about trading start with a demo account to know about trading.



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