This is a question that is asked very frequently, by beginner investors, all the way to the very top of the echelon. Whether or not you should buy and invest in oil stocks now, depends primarily on your financial standings. Oil, which has been refereed to as black gold, is a very valuable commodity, mainly because it is a limited resource that we (the entire world) need to live. Not because we eat oil to survive (laughs… ), but because it is what makes the economy revolve, and what keeps the world going at this very fast pace we have set.
The short answer to, “Should I Buy Oil Stocks Now?”, would be you should have bought them 20 years ago. But that answer can be said for almost all stocks. With this knowledge, and view of the history of most limited resources, like water, gold, silver, and oil, I can confidently say that in my opinion it is safe to by oil now. Not only is it safe, but it could turn out to be one of the best investments you ever make in your life.
Oil fluctuates on a daily basis, just like the other commodities on the market. One of the things I’ve noticed over the years of watching the stock market, is what kind of situations drive the price of oil up, and bring the price down. Since oil is so precious and valuable to us, it reacts rather aggressively to market conditions, such as shortages in supply, or over supply. If there is too much oil stocked up, the price per barrel will decrease, and vice versa.
I have also noticed that the oil prices react a lot to news that may affect its supply. So even if supply is normal, but there is a threat that will cut off supply, you can bet (literally) that the prices per barrel will spike up fast. I’ve noticed this phenomenon during threats of war, in which main oil supply ports could potential be cut off.
So, besides oil being very volatile to shifts and news in the market, it is still a very solid long term investment, because it is a limited resource that we have not yet found a replacement for. How would we drive cars, or fly airplanes without oil? We need oil right now, and our supply sources are not growing, which is one main reason why you should buy and invest in oil stocks right now.
Until we find a replacement for oil (potentially electricity), it will still increase in value over time. In the extremely unlikely event that we find an instant oil replacement, we would see prices plummet down to nothing. But ask your self, “what are the chances the world finds a replacement for oil in my lifetime”, and make your bet on the answer. Buy it!
Buying into oil can be done multiple ways. You can do it the most direct way, which would be to invest directly into the commodity via ETF. Or you can do it less indirectly by buying stocks in an energy company that deals very closely with oil. One such company that I have invested in, and really like is SU:CA, Suncor. Energy companies like this will go up and down in value according to the price of oil, and react to changes in the general indices and news. By investing indirectly via energy stock, you also get the added benefits of choosing a solid company with a good future, that may also pay dividends!
Overall, if you have money that you want to invest, adding oil to your portfolio would be a great idea. On a more riskier note, oil can also be fun to swing trade! If you get wind of a situation that may decrease oil supplies, then buy in low, and ride the swing up. The possibilities are endless, have fun investing!