How To Invest In Oil In 2016

How To Invest In Oil In 2016

Oil – is not an ordinary commodity. Prices are determined by the economic situation of entire countries, including our country. Let’s learn from it benefit. Read my review of how to invest in oil in 2015.

Barrels of black muck today become a cause of wars. The owners even small touring rigs to lamborhini and is considered the king of life. And this dependence on oil has been going on for decades.

Many historians have expressed the view that the main objectives of the First World War was the struggle for oil fields. By the way, this war is called the “war of engines”. After all, it was the first massively used tanks and other equipment. This means that the fuel was indeed a key and strategic factor for success. Proof can serve as a major victory at the time oil-producing countries, including, by the way was the Russian Empire.


In the XIX century kerosene produced from petroleum replaced whale oil in the lamp. Since oil saved the whales.
In the XIX century kerosene produced from petroleum replaced whale oil in the lamp. Since oil saved the whales.

Do I have to remember, because of what, in fact, the Soviet Union collapsed, and what is the true reason for the invasion of Iraq in 2003?    By the way, I recommend to read interesting article about anthe oil wars. This, no doubt, oil is one of the most important minerals for mankind.

The story of why the oil, I think, can be skipped. All of us, at least, understand that making petrol out of it. A gasoline need to feed our favorite cars. And this is just one of the functions of oil.

But on the specifics of pricing oil I will stop longer. As I mentioned at the beginning of this article, the “oil – it is not a commodity.” There are several fundamental factors that dramatically affect its quotes.

What affects the price of oil?

In general, under the price of oil to understand the value of a barrel of a marker of sorts. At the same time, a barrel is equivalent to 158,988 liters. A marker as grades, often used, produced in Europe «brent». In addition, very common are the North American oil «WTI» (West Texas Intermediate, literally “the usual oil from West Texas”) and the Russian Urals.

The price of a barrel of oil affects the economic, regulatory and political factors. Moreover, it often happens that different factors at the same time have the opposite effect. Let’s understand.

The supply and demand for oil

Demand creates supply. This is a fundamental principle defined by John Keynes, classic economic theory, two hundred years ago. And oil is also subject to this principle.

However, it is not necessary “to open Africa”, to understand that the demand for oil each year is growing. Manufacturing, housing and communal services and transport – all require lubricants, which are derived from petroleum. Of course, the advanced countries are trying to use peaceful nuclear energy (most NPPs in France), electric vehicles (for example, Tesla) or even wind turbines (the most common in the Netherlands). But this is only a drop in the sea.

On the other hand, should take into account production (extraction) of oil. Therefore, all oil traders are closely watching the current statistics production. If production is not keeping pace with demand – oil prices are rising. Generally, if production is reduced – prices are rising.

Thus, the price of oil is influenced by

  • the decision of countries outside the OPEC (Organization of Petroleum Exporting Countries) to increase or decrease oil production quotas,
  • a decision of major oil exporters outside OPEC to increase or decrease oil production quotas,
  • breakdowns and catastrophes in the areas of oil production,
  • the decision to increase or decrease the reserve oil,
  • speculation on the exchange of large investors.

The largest oil producer in 2015.

Country Production, one million tons per year consists of OPEC
Saudi aravia 543,4 Yes
Russia 534,1 No
USA 519,9 No
China 211,4 NO
Canada 209,8 No
IRAN 169,2 Yes
OAE 167,3 Yes
IRAC 160,3 Yes
Kuwait 150,8 Yes
Venezuela 139,5 Yes

Интересно, that the decisions of countries extracting crude oil «Brent» (UK and Norway) can not seriously affect the price. The fact that their production volumes are extremely small compared with the largest miners and exporters.

At the same time, looking at the list of leaders of production, once it becomes clear why the Russian budget depends on oil prices, which have found the United States in Iraq and how worthless Venezuelan was in Formula 1 :). At the same time, all the major earners seeking to increase their exports. And, often, this leads to a conflict of interest between them.

Political factors, oil prices

Here, first of all, we should note the Middle East. It was there, in the territory from Iran to Egypt, a huge number of “black gold”. And there is often war.

It’s hard to believe, but only in the XX-th century in the Middle East was 92 war. The composition of the attacking and defending radically changed. But the main motive was always a real one. The struggle for resources.

Unfortunately, today we are seeing instability in the region. Yes, my friends, in Syria, too much oil. Thus, the following rule. The worse the situation is, the more acute conflict, and the threat of production and export, the higher oil price.


Cost of production of one barrel of oil in Saudi Arabia is only $ 2
Cost of production of one barrel of oil in Saudi Arabia is only $ 2

Other battleground which victim, becomes the price of oil – the eternal confrontation between Russia and the United States. Russia’s budget is very dependent on oil exports. If the price tends to zero – you have to “tighten their belts.” The United States is well aware of.

In addition, Saudi Arabia and the UAE – are good allies. And it just so happened that the 1980s, the trio agreed to a sharp increase in oil production. The price of oil has responded to more than three-fold drop from $ 70 to $ 20 per barrel. Not all countries have lived through it.

In other words, the oil can be a tool of pressure on one country or another. Therefore, the construction of oil price forecasts should take into account the policy of the largest manufacturers.

The relationship between oil and the US

Do not think that I’m raving-mad at the United States. No. The fact that some of the factors of the US economy objectively affect the price of oil.

First, gross domestic product in the US is about 20% of world GDP. This means that the slowdown in America, will slow the global economy. Reduce fuel consumption and oil-chemistry. So drop the price of oil. This is the case, for example, in 2007, the year.

Secondly, the price of oil is inversely proportional to the rate of the dollar against the  and euro other major currencies. After all exporters eventually convert dollars into its national currency. For example, Russia sells oil for dollars and then most of the proceeds will be converted into rubles. So, the higher the dollar, the cheaper oil.

The paradox is that the problems in the US economy may cause a weakening of the dollar. Hence, the influence of countervailing factors to be balanced and the price of oil can not be changed. But this theory. In practice, it often happens that problems in the US economy is even more problems in other economies. And against this background the dollar against other currencies increases. And oil – is getting cheaper.

Other factors shaping  prices have

oilan impact on the oil market may have news from the major oil-producing and oil-refining companies. Remember the explosion of an oil platform in the Gulf of Mexico in 2010? Oil prices soared on the news by 14%.

The largest oil companies, may have an impact on the price of oil is:

Country Company Country Company
USA ExxonMobil Russia Rosneft
United Kingdom Shell Russia Lukoil
United Kingdom British Petrolium (BP) Italy ENI
US Chevron Corporation China PetroChina
US ConocoPhillips Venezuela PDVSA
France Total SA Malaysia Petronas

Friends also note the oil service company Schlumberger. First – it is large enough to have an impact on the price of oil. Second, the word “shlyuberzhe” very cool sounds.

In addition, prices may significantly alter scientific progress. The development of new and more cheap and simple way to oil production and transportation reduce its cost. Ultimately, the price is reduced.

Finally, the weather – can also serve as a factor in pricing. A warm winter in Europe will lead to lower demand for oil products. Falling demand – the price falls.

How to invest in oil in 2015.

Now there are three effective ways of investing in oil. Produce oil, to invest in oil companies and oil trading. All three options are good in their own way.

Oil

If properly organized, you will get a long-term source of revenue, which quickly pay back investments. But there is a caveat. Investments are required not small.

First of all, to produce the raw materials needed to equip its field to pave roads and pipelines. In addition, it is the deposit you need to buy or rent. The cost depends on the oil fields of proven reserves, as well as the availability and quality of existing infrastructure. Standing Offer starts from only $ 60 000.

Large projects with many towers, extensive transport network are already $ 5 000 000. Add to this refinery and payback period is 2-3 years, and the yield will increase significantly. But it will cost, no less than $ 70 000 000. One day, I happened to oversee the investment crediting of the project. Interestingly, the field was a Russian, and the company – offshore.

Investments in oil companies

As in the case of gold, savvy investors prefer to trade not only in oil but also in shares of oil companies. At the same time, there is a wide variety of options. You can invest in both domestic and foreign companies.


The distribution of oil in the world (click to enlarge)
The distribution of oil in the world (click to enlarge)

l the major foreign oil companies use the joint-stock form of ownership. Most of them are listed on either the New York or the London Stock Exchange. In addition, major US and European companies are united in the stock index Amex Oil Index (XOI). The average annual yield of the index in the history is 59%.

Oil Trading

This investment option is the most affordable. Buy and sell oil can be through any majorbroker.The minimum amount of investment can be as little as $ 500- $ 1,000.

Potentially, it is also the most profitable way of investment in oil. In the fall of crude oil in December 2014 could increase tenfold the capital in just a month. It is true that  risks the should be remembered.

The trading terminal has its own oil designation:

  • Sort «Brent» referred to as «UKOIL»;
  • Grade «WTI» referred to as «USOIL».

Russian oil has no designation. All trade in the domestic “black gold” is being extremely old-fashioned. Updated.In November 2015 the test will start trading a new marker grade of oil Russian companies.

Friends, think about investing in oil seriously. Every year, its stock will be less, and demand no where to stay. In my opinion, this trend is very promising investment of money.

I would appreciate your questions or your opinion on how to invest in oil in 2015 the comments.in

I wish you all a profitable investment!

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