Investors who have experience with corporations may be hesitant to get into commodities like oil and gas. The two sectors are driven by different factors. Publicly traded corporations pay dividends based on the profits they earn, while commodities’ prices fluctuate according to supply and demand. However, investing in oil, in particular, can be very profitable for individuals who are willing to learn a little bit about the industry and develop a sound investment strategy. The following are some of the top reasons to invest in oil in 2017.
Oil Prices Are Increasing
First of all, many of the world’s major oil producers have been working on reducing the supply. OPEC made an agreement to cut production in 2016 to eliminate an oversupply of oil that glutted the market and caused prices to crash. The effect so far has been to stabilize plummeting prices and slowly bring them back up. At the same time, global demand is on the rise, which is very likely to drive prices back up even higher.
Oil Companies Are More Efficient
When oil prices fell, oil companies could no longer rely on that income to keep their operations going. Although many companies have gone bankrupt over the past few years, the survivors have figured out how to do more with less money, with some companies scaling back operations and others developing more efficient ways to drill and maximize production. These adaptations are allowing the oil companies to profit even with lower prices.
Experts Are Betting On Oil
According to a survey of investment banks at the beginning of 2017, the banks are betting on oil being a good investment this year. Both analysts and banks are predicting a modest rise in prices due to the lower supply and more robust demand, especially from Asia. They also cite drops in the supplies of gasoline and diesel as factors that will boost oil prices.
Investing in oil requires an understanding of the market and all of the factors that influence the movement of prices. However, the learning can pay off in profitable investments. Investors can get more information about investing in oil and other parts of the energy sector from this page.