The oil industry is producing about 98 million barrels every day. Oil investments fuel the oil market’s success and have currently pitted a barrel’s price at approximately $70.
The global oil industry has recorded a whopping $3.3 trillion in revenues per annum.
It’s no surprise that the oil and gas sector constitutes 3.8% of the global economy. This includes companies that specialize in drilling oil from shale, refining crude petroleum, and recovering naturally-occurring hydrocarbons.
Given that fossil fuels are critical to the economy, accredited investors are keen on placing their bets on oil stocks. To do that, you require an intimate understanding of how oil drilling operates, and oil prices fluctuate.
The Conservative Players
Novices in the energy investment market are the consecutive players who frequently choose integrated oil stocks to make their debut. Integrated oil producers carry out upstream and downstream operations, unlike other oil companies in the market. This allows the shareholders of integrated oil stocks to enjoy enormous dividends with low risk, and avail a wide variety of investment options.
These are firms that focus on downstream operations, which essentially means that they’re neither drilling for oil on offshore sites nor producing it. They’re solely refining oil that’s sourced from drilling companies. However, they have stakes in setting the oil price since refining margins affect market demand and, consequently, the price.
Independent Oil Companies
Such production facilities are much smaller than integrated companies since they’re not involved in defining activities. Some independent oil companies have stood the test of time and risen to success in the industry. This has made them popular among oil investors who are looking for oil stocks. However, it’s always useful to check if and how much dividend a prospective company pays. If they depend heavily on natural gas than oil, their profits can fluctuate vastly and impact dividends.
Rewards for Oil Investment
Return on Investment
Petroleum products and natural gas attract substantial investments because of promising rewards. Accelerating technological growth and new drilling methods have opened new avenues of success. Oil stocks climb a steep slope, and profits trickle down to investors soon after the company is established.
Oil prices are an economic dictum on the costs of other commodities in the market. A rise in oil prices can perpetuate losses for different kinds of stocks. However, oil stocks preserve their value in times of economic slowdown and offer stability to investors. If you’re looking for stocks that provide a hedge against inflation, consider oil companies.
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