Renewable energy is fast gaining relevance on the planet, but oil remains the world’s primary source of energy. Every day, several barrels of crude oil are used across the globe and it is expected that this number will increase in the future. With cars needing gasoline to function and power plants needing natural gas and other natural resources to generate energy, oil is bound to remain at the top of energy sources in the world.
Every investor looks for viable sectors to invest their funds. With the viability of the oil sector, it has recorded so many investors in the last few years. With the increased number of oil investors presently, it is estimated that the sector will record an exponential growth in the coming years.
If you are looking to invest in oil and gas, it is important that you research the sector properly to get vital information needed in decision making. This article will outline some of the options to choose from. Please continue reading as we explain more.
Top Oil Investment Options
Here are some options to consider:
Futures
Futures allow you to invest directly in oil and gas. If you don’t want to buy tons or barrels of oil and store them in your facility, this option will be a great idea. A futures contract binds a seller and a buyer to perform a transaction on a set date and price in the future. This option is risky and complicated; hence you need to understand it properly before delving into it.
Direct Participation Programs
This option is another viable method of acquiring direct exposure to oil. DPPs use the capital from different investors to create a limited partnership used to fund oil-related procedures like extraction and well drilling.
This investment option is also involved in the oil and gas sector in different ways so it is important that you find out the sector your investment is under, whether it is storage, drilling, or processing. Ensure to verify the business plan and management of the business. If you fail to do this, you may lose your capital if the business doesn’t post any profit.
For more information about DPPs and how they work, you can read this article.
Mineral Rights
This option involves the ownership of the resource on a piece of land such as precious metals, and natural gas. Mineral rights provide a direct approach to investing in the oil sector, especially if there are natural resources in the affected portion of land.
While you can easily set up your company to extract the resources from the target land, it may be costly and difficult. The cost-effective and easiest method to handle this investment option is to lease or sell the land to mining companies. This is because they have the machinery and staff to handle the procedures involved in extracting mineral resources.
ETFs (Exchange-Traded Funds)
Investing in exchange-traded funds or mutual funds is a low-risk way to earn from the oil sector. ETFs are similar to stocks and are available for purchase in the stock exchange market. When you acquire these funds, you’re dealing with commodity spot pricing for petroleum products. Spot pricing is the current market price for commodities.
Shares
This is one of the methods that investors can use to add natural resources to their portfolio. You can start with a single share or less if your brokerage allows for the acquisition of partial shares. Shares are a liquid investment that has low volatility, especially when compared with other investments. So many natural gas companies pay dividends and this allows investors to generate income on their investment. Keep in mind that stock investments are risky and one can easily lose their capital if the firm you are working with performs poorly.
These tips will come in handy if you are considering an investment in the natural gas sector. For suggestion on other investments that you can consider, you can check here: https://www.goodfinancialcents.com/.
Conclusion
If you are looking to invest your funds in a viable sector, then considering the oil and gas sector is a great idea. This article highlighted some options to consider. Feel free to check them out.