Business

Why Oil is a Great Option for Online Investors

While the commodity oil has experienced mixed fortunes over the course of the previous six years, it appears as though it may be poised to record impressive growth through the remainder of 2021.

This is thanks largely to increased optimism and market sentiment, with western economies now beginning to relax lockdown restrictions and trigger a global increase in demand.

This is borne out by the statistics, with the price of WTI Crude rising from $39.70 on June 29th, 2020 to $73.88 per barrel just 12 months later.

In this post, we’ll ask how the price of oil has fluctuated in recent years, while considering whether this is a good and viable investment option in the current climate.

The Price of Oil Since 2015 – What Have Been the Primary Factors?

 Since 2015, the price of oil has fluctuated wildly, thanks primarily to a sustained imbalance between supply and demand.

More specifically, supply has continued to outstrip demand across the globe during this time, with countries such as Russia, Saudi Arabia and Nigeria continuing to produce on a large scale and superseding the efforts of OPEC to manage production in line with demand.

Make no mistake; the recent rally is built on the premise that global demand will consistently outperform supply over the course of the next six months, despite OPEC+ starting to scale back their production cuts and allow more freedom in the marketplace.

Of course, the most recent relaxation of oil production cuts has curbed the Q2 price rally, with Melinda Earsdon, who’s the Global Head of Public Relations at Oanda, revealing that prices began to ease lower after strong gains at the beginning of this month.

In fact, data from China showed a 14.6% year-on-year decline in crude oil exports through May 2021, although it’s not currently thought that this depreciation will be enough to curb the bullish trend forecast for the remainder of the year.

So, is Oil a Good Investment in 2021?

 Given the clear volatility of oil and its vulnerability to factors such as supply and demand, you may be inclined to swerve this as an investment opportunity.

The oil and gas sector is also cyclical in its nature, which means that investors are likely to experience alternating and yet still unpredictable peaks and troughs.

However, there are various ways of investing in this market, other than trading the commodity directly (which optimises your exposure to risk).

More specifically, you can access some of the most reliable and profitable oil and gas shares through indices trading, including Royal Dutch Shell and ExxonMobil. This creates an instantly diversified investment vehicle, and one that allows you to speculate on underlying price movements and create more agile returns.

The companies referenced above also represent relatively safe and reliable investments, further strengthening oil and gas as viable options in the current marketplace.

Other relatively safe assets include BP and Chevron, which each boast stable, global operations and annual revenues in excess of $100 billion.

The same can be said for large exploration, production and pipeline companies (like ConocoPhillips and Kinder Morgan), which are also poised to see sustained growth through 2021 as production cuts are eased and global demand begins to rise.

Back to top button