Summary: Investing in oil can be an attractive option for anyone looking to diversify their investment portfolio and potentially capitalize on the global demand for energy resources. For those new to putting money in raw materials and products, a reliable way to buy and sell oil is through a regulated online broker like eToro that offers commodity trading services.
Best Commodities Broker for Intermediate Traders and Investors
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Invest in 30+ commodities and 3,000+ other assets including stocks and cryptocurrencies.
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0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.
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Copy top-performing traders in real time, automatically.
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eToro USA is registered with FINRA for securities trading.
The significance of oil as a global commodity
Oil is a highly sought-after and valuable asset in the global economy. As a physical commodity, it’s a vital energy resource used in transportation, industrial processes, and the production of various goods.
Oil is traded in financial markets as a commodity, and its price is influenced by a multitude of factors, including geopolitical events, global supply and demand dynamics, weather conditions, and economic indicators.
On the other hand, oil as an asset offers several characteristics that attract investors. As such, it has historically provided opportunities for capital appreciation and potential hedging against inflation.
Additionally, oil investments can serve as a diversification tool within a portfolio, as they often exhibit a low correlation with traditional asset classes like stocks and bonds.
Note
Where to buy oil?
Luckily for anyone new to investing, there’s a whole myriad of online brokers that make venturing into any market easy and straightforward. One such multi-asset platform is eToro, through which you can gain exposure to CFD oil trading.
How to buy oil? Step-by-step instructions
To start investing in oil, follow these seven simple steps:
- Step 1: Register on eToro and verify your account (personal or company);
- Step 2: Once you’ve signed up, you’ll need to enter the amount of cash to deposit in your account;
- Step 3: Connect your bank account to eToro;
- Step 4: Go to Discover, choose Commodities, and then choose Oil;
- Step 5: Enter the desired amount;
- Step 6: Review the stop loss, leverage, and set profit parameters;
- Step 7: Select Open Trade to conclude.
Disclaimer: 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. This content is not intended for US users. eToro USA LLC does not offer CFDs, only real Crypto assets, Stocks and ETFs are available.
Best Commodities Broker for Intermediate Traders and Investors
-
Invest in 30+ commodities and 3,000+ other assets including stocks and cryptocurrencies.
-
0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.
-
Copy top-performing traders in real time, automatically.
-
eToro USA is registered with FINRA for securities trading.
Oil price today
Different ways of investing in oil
Investing in oil as a commodity is similar to investing in other things. Nevertheless, instead of buying an actual barrel of oil, which is like owning a bar of gold, there are more practical options available:
- Futures contracts: A futures contract is an agreement to buy or sell a certain amount of oil (e.g., barrels of oil) at a specific price and date in the future. When buying futures, both the seller and the buyer agree on a payment to secure the contract;
- Exchange-traded funds (ETFs) and mutual funds: If you prefer to let experienced traders manage your investment, you can invest in oil-related ETFs or mutual funds. ETFs are passively managed and traded throughout the day, while mutual funds are actively managed and traded at the end of the trading day;
- Stocks: You can invest in the oil market by buying stocks of companies involved in oil refining and distribution. There are different types of oil companies, such as upstream, midstream, downstream, and integrated companies;
- CFD trading: If you prefer a seamless trading experience, you can try using a regulated exchange platform. They offer an easy way to engage in contracts for difference (CFD) trading, which allows you to speculate on the price difference of the commodity between the time of purchase and the current price. This option allows you to gain exposure to commodities without actually owning them.
Should I invest in oil?
Whether or not to invest in oil comes down to your investment goals, risk tolerance, and the outlook of the market. Investing in it can offer opportunities for significant capital gains and also diversification of your portfolio.
Oil is a globally traded commodity that plays a critical role in the energy sector, with a strong market demand. Nevertheless, it has its risks. It’s rather volatile because of geopolitical events, the imbalance of supply and demand, and environmental concerns.
That said, it’s key to understand the dynamics of the oil industry, and closely monitor key indicators that can help you with informed investment decisions. It’s also crucial to diversify investments and consider other asset classes to mitigate any risks.
Common mistakes to avoid when investing in oil
When investing in oil, there are several common mistakes that investors should be aware of and should look to avoid:
- Neglecting thorough research: Failing to conduct comprehensive research on the oil market, including supply and demand dynamics, can lead to uninformed investment decisions;
- Overlooking risk management: Neglecting risk management strategies such as diversification, setting appropriate stop-loss orders, and managing position sizes can expose investors to excessive risk;
- Timing the market: Avoid predicting short-term oil price movements; market timing often yields suboptimal results. Focus on long-term trends and adopt a strategic investment approach;
- Ignoring broader market factors: Various factors like macroeconomic conditions, currency fluctuations, and global energy policies influence oil prices. Ignoring these broader market factors and their potential impact on oil prices can be a significant oversight.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about how to invest in oil
Can I invest in oil?
Yes. It’s possible to invest in oil securely and easily through regulated exchange platforms, such as the highly-popular eToro.
How to invest in oil?
Connect your bank account to a regulated third-party exchange service and choose oil in the commodities section.
Where to invest in oil?
You can invest in oil through various online broker services, such as eToro.
Is oil a good investment?
Investing in oil, despite volatility and external factors, presents a lucrative opportunity due to its essential role and global demand.
Best Commodities Broker for Intermediate Traders and Investors
-
Invest in 30+ commodities and 3,000+ other assets including stocks and cryptocurrencies.
-
0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.
-
Copy top-performing traders in real time, automatically.
-
eToro USA is registered with FINRA for securities trading.
