Oil is one of the most precious commodities in the world, but for all sorts of strange reasons, there are many investors who do not include it in their portfolios. Some wrongly assume that acquiring the popular energy asset is too complex, while others simply don’t know where to begin. The standard unit of trade for petroleum is barrels, but few people who do own it purchase in those units. Instead, petrol enthusiasts choose to own shares of stock, exchange traded funds (ETFs), or CFDs (contracts for difference) to hold a stake in the world’s most common form of energy. Why should the everyday investor consider getting involved in the market for black gold, as the slippery substance is sometimes called?
One of many reasons is the recent space of price increases that seems to be ongoing and quite strong. Based on volume and rapid growth, UK oil trading has been one of the hottest commodities during the past year. The trend shows no signs of letting up and is just one of the factors bringing so much new money into the sector. But the trend is about much more than prices. For instance, in just the past decade, there have been multiple new ways of acquiring, holding, and trading petroleum assets. In the past, most of the action took place on commodities exchanges, where well-heeled institutions and individuals bought and sold pricey contracts of the raw material in units of 440 gallons each, or 100 barrels. There are plenty of useful resources available to learn more on UK oil trading.
Today, everything is different. Investors can buy as much or as little of the substance as they wish and are no longer forced to put huge amounts of money on the line in order to take part in the action. What else is behind the surge in interest? In addition to the fact that extracting petrol from the ground is a costly affair, tight global supplies, historically high demand, and volatile day-to-day prices, there is currently an acute energy shortage that is driving up the scarcity and cost of non-oil assets. Here are more details about the factors that have turned oil-related assets into one of the decade’s most cherished commodities.
Prices Are Rising Worldwide
One of the freshest developments in the petroleum sector is rapid price increases. In years past, per-barrel values fluctuated wildly but rarely have there been sustained increases like the first half of 2020. During that short period, per-barrel costs for buyers have risen from below the $20 mark to above $80.
Trading is Easier Than Ever
CFDs (contracts for difference) make it simple for everyday investors to take part in the energy sector. That’s mainly because the contracts don’t obligate the buyer to own the underlying asset. Instead, traders choose how much capital to risk and then predict the direction of the price. This is, without doubt, the most advantageous technique for capitalizing on short-term price changes in the petrol niche.
Extraction is Incredibly Expensive
Why is the cost of extraction a part of the attraction for oil-related assets? The answer lies in the fact that when it costs a lot to bring a product to market, companies can’t artificially create huge amounts of it overnight. And because it can take drilling and refining operations many years to locate, extract, purify, and market oil, traders realize that rising prices are usually more than a temporary phenomenon.
Supplies are Tight
One of the cold, hard facts behind oil’s popularity during the previous year can be summed up in two words: short supplies. Simply put, the world’s primary producers, including the OPEC+ nations as well as the US, are not awash with petroleum. And even when short-term supplies rise for a month or two, sellers tend to place those rare excess amounts into reserve storage facilities.
Demand is High and Growing Quickly
As dozens of developed nations are slowly rebounding after the COVID pandemic, the demand for petroleum-related products is increasing. That means prices could continue to rise. Even if the asset has seen its best days and begins to drop in value, short selling becomes a prime opportunity for wise investors.
Prices are Volatile
Using CFDs for short-term price moves is what makes volatility so attractive for millions of active investors. Keep in mind that the cost of a barrel of petroleum has quadrupled in little more than a year.
There’s a Global Energy Shortage
With OPEC’s production restrictions and other oil producing nations cutting back on output, it’s hard to say when the shortage will end. In general, that means there’s vast support for long-term barrel values above $50 and nearly equal support for levels above the $60 mark.