Trading oil: everything about oil investing

Oil is also known as ‘black gold’ and that isn't just a random nickname. Oil is one of the most important fuels and it plays a crucial role in the economy's health. As oil reserves are drying up, the battle for the rare black gold will intensify. Does this scarcity offer possibilities that you can profit from?

Start to trade oil in three steps:

Fun-fact: You can trade oil 100% risk free through a demo account.

Different ways to trade oil

Stocks of oil companies

trading in oilYou can trade oil in a few different ways. One of the most well-known ways is to trade oil indirectly by buying stocks of oil companies such as Shell and BP. However, when you trade in oil stocks there are many different factors that influence the price of the stock besides the price of oil.

The BP oil spill in 2010 in the Gulf of Mexico, for example, resulted in public outrage which caused the price of BP’s stock to drop significantly. If you really just want to trade oil directly, you can use so-called CFDs instead.

Oil barrels

Several online brokers allow you to trade oil barrels. You pay a certain amount in pounds and your purchases are placed under open positions in your account. If the price goes up, you profit; if the price goes down, you lose money. The barrels aren’t physically delivered to your doorstep, of course. You’re merely speculating on their price.

If you want to try out trading oil this way, you should check out our broker overview and choose one of the many brokers to invest with.

Want to trade oil yourself? Trade CFDs and oil company stock at Plus500.

Short-term price of oil

In the short-term, the price of oil can fluctuate quite dramatically. There are a lot of factors influencing the price of oil. Eventually the price is determined by the balance between supply and demand. For example, if OPEC decides to export more oil, the price of oil goes down because supply increases. A conflict in a country that exports oil could drive the price of oil up.

Determining the price of oil short-term can be tricky. There is a pretty clear trend surrounding the oil price, but this can be influenced by random events in the world. Oil is a popular trading commodity amongst day traders. Since the price fluctuates heavily, you could also use leverage to make even more money by trading oil.

Long-term investments in oil

Oil will not be available forever and with large consumers such as the United States and China the demand for oil will only increase. According to recent predictions, it will only take another 40 years for all of the oil to run out. Oil seems to be a good investment right now, because as the supply decreases it can be assumed that the price will start increasing. It is estimated that a barrel could cost 200 pounds within the next 5 to 10 years. Trading oil is a lot more interesting all of a sudden!

Start trading today?

Before you make the decision to really start trading oil, it’s wise to practice first using a free demo account. This way you learn the basics of trading, how to make proper decisions regarding the market and how to make money by trading.

Useful links: start trading directly!