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Invest in Oil

Written by Peter Siks | 5 minutes
FRI 20-09-2019

The oil price has risen sharply due to the drone attack on two oil installations in Saudi Arabia. The question that arises is whether this still offers investment opportunities. Is the oil price rising even further? Or are you already late? This article lists a number of options to anticipate a further rise in oil prices and how you can invest in oil.

The oil price


Looking at the chart of the oil price (Crude Oil Future) for 2019, you can see that it made a huge leap on Monday, September 16. Almost 10% has been added since Friday 13 September.

But in a broader perspective, in my opinion, little is going on. The provisional high point in 2019 of more than $ 66 is still 10% gone and January 1 this year oil was still at $ 44.
The value of your investments can fluctuate. Results achieved in the past offer no guarantee for the future.

Higher or lower?

The oil price depends on supply and demand. On the supply side, a big hitch has now come. It appears that almost 6% of daily production has been affected and that of course has a price-increasing effect. At the same time, oil prices have been on a downward trend since May, driven or not by slowing global economic growth leading to lower demand. A higher price will also initiate American (shale) providers to increase production.

On the other hand, there is again the speed with which production can be started again. Is it a matter of days or is it going to take months to get the production back up to standard? So unfortunately the scrystal ball that tells what the oil price is going to do is cloudy ... but what are the possibilities for you as an investor to invest in oil?

Individual shares

Of course you can choose to invest in individual shares of companies that are affiliated with oil. The most famous is Royal Dutch Shell, which rose by more than 2.5% the day after the attacks. The BinckBank investor barometer of September already showed that this is a favorite share among many investors. If you want to look further you can think of the superpowers Total, BP or Chevron. And also shares of oil-related companies such as Fugro, SBM Offshore or the American Schlumberger. All these shares showed a sharp rise on Monday.
If you believe that there is still much upside potential in the oil price, these shares are likely to continue to benefit.
Oil ETFs

Another way to take advantage of an (expected) further increase in the oil price is by buying a basket of shares from companies that are all oil related. For the European market you can think of Lyxor ETF STOXX Europe 600 Oil and Gas or iShares STOXX 600 Oil & Gas UCITS ETF DE. If you want to focus on a global energy market, you will end up with the SPDR MSCI World Energy UCITS ETF, for example.

The oil price itself

The most direct way to respond to an oil price movement is to take a position in oil. Because you cannot trade in physical oil yourself, you could use a future on the oil price. Pay attention! Before you start investing in oil with futures, first read the information about investing in futures. We recommend that you invest with futures only if you are an experienced investor and are aware of the operation and risks.

An underlying value that moves strongly inspires the imagination of an active self-investor who loves movement. But mind you, the movement is caused by something that many analysts were afraid of, but always comes unexpectedly. In my opinion, an investment in oil is currently classified as "very offensive". The question that you have to ask yourself at the moment: does this suit me and do I want that? If you answer positively, you have been presented with a number of options.

Investing involves risks. Your investment may be worth less.


Peter Siks

With more than 30 years of experience, Peter Siks has now been tried and tested in investing. Among other things, Peter is interested in the psychological aspects of investing and since 2010 he has been working at BinckBank as an investor trainer.

The information in this article should not be interpreted as individual investment advice.  Although BinckBank compiles and maintains these pages from reliable sources, BinckBank cannot guarantee that the information is accurate, complete and up-to-date. Any information used from this article without prior verification or advice, is at your own risk.  We advise that you only invest in products that fit your knowledge and experience and do not invest in financial instruments where you do not understand the risks.

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