The oil market offers numerous profit opportunities, given its immense liquidity. The price of oil in recent months has now stood above $ 60 a barrel and so, in addition to crude oil prices, oil stocks have also made gains.
In fact, the shares of the companies operating in the oil market have a positively trend correlated with the price of crude oil.
Investing directly in WTI or Brent oil would mean investing on an extremely volatile market linked only to raw materials. The oil shares are dedicated for those savers who wish to invest on the oil market, but indirectly, or on companies that operate on the raw material.
What are the four most important oil stocks? How does trading through CFDs on these stocks work?
Oil stocks: Royal Dutch Shell
Royal Dutch Shell is a Dutch oil company listed on the London stock exchange, which operates worldwide. It is in fact present in 140 different countries, but mainly in the United States of America, where it has a subsidiary called Shell Oil Company.
In addition to the oil sector, the company is active in the energy and petrochemical sectors. Among the oil stocks, Royal Dutch Shell distributes very high dividends. The dividend yield is in fact 5.74%, while the P / E (price / earnings) ratio is 20.54. The company’s revenues were quantified at $ 305.18 billion.
At the time of writing, the Royal Dutch Shell (RDS) share price is $ 64.28 each. Its market capitalization amounts to 265.56 billion dollars, while in the last year the value of the share has increased by 21.63%.
Oil stocks: British Petroleum
Another major company operating in the oil and energy sector is British Petroleum. It is a British company listed on both the London and New York stock exchanges, that is, Wall Street.
Its current name is BP plc, coined in 1998 on the occasion of the merger with the Amoco (American Oil Company), but insiders often continue to call it with its original name.
The dividend issued by British Petroleum is 5.98%, while the price / earning ratio is 35.5. The latest revenue figure records $ 240.21 billion.
These oil stocks are currently valued at $ 41 each and the entire market capitalization is $ 134.48 billion. Over the past 12 months, BP’s share price has grown by 17.94%.
Petrol stocks: Total
Total is a French company listed on the stock exchange in Paris, Milan and New York. It is active in the oil, natural gas and also in the chemical sector.
However, Total’s oil shares do not generate any dividends. The P / E ratio is instead of 14.79. The latest revenues made public were 121.69 billion euros.
At the time of writing, the title has a value of € 47.66 on the Paris stock exchange. The market capitalization is € 122.92 billion. Compared to the listing of 12 months ago, Total shares depreciated by 0.98%.
This is a symptom that Total’s shares have a very high growth margin compared to other oil stocks.
Petrol stocks: Exxon Mobil Corp
With Exxon Mobil Corp we complete the picture of the four largest oil companies in the world. It is an American company listed on the New York Stock Exchange. Exxon works in the field of petrochemistry and electricity production. Among the various subsidiaries, the most famous is Esso, a brand that the company uses in Europe.
Exxon Mobil is nothing more than the merger of the previous companies Exxon and Mobil, which took place in 1999.
Exxon Mobil pays dividends equal to 4.11% of the value of the oil shares. The company’s revenues are $ 252.85 billion, while its market capitalization is $ 317.89 billion.
It should be noted that in 2012 his turnover was $ 453.123 billion and he recorded profits equal to $ 44.880 billion. Revenues exceeded Saudi Arabia’s GDP that year.
These oil stocks are currently valued at $ 74.89 each, but the stock lost 9% from a year earlier. As with Total, this figure could also be a symptom of a possible future increase in the value of the shares, above all thanks to the price of oil, which has remained high in the last period.
Why investing in oil stocks through CFDs
To invest in oil stocks, it is possible to adopt the traditional method, or through bank intermediation. However, there is a financial instrument that requires intermediation, but it is much more accessible and intuitive, namely CFDs. This abbreviation stands for Contracts for Difference.
CFDs replicate the performance of oil stocks, without however offering ownership to the investor.
He will get his gain or loss depending on the movement of the share value. The difference in price between the initial value and the final value of an operation will therefore constitute the profit (or loss) of the trader.
CFDs are part of the unregulated market, called over the counter (OTC). By adopting this financial instrument to invest in oil stocks, it will be possible to invest both on the long rise and on the lower of these.
Contracts for Difference are not subject to restrictions on short selling.
The strength of CFDs is undoubtedly the financial leverage. It allows the trader to be able to increase his earnings consistently. In fact, for example, an investment of € 1,000 with a 1:10 leverage will become € 10,000. Any profit must be related not to the first figure, but to that generated by the leverage effect.
Attention should be paid because the same goes for losses. An excessive loss could lead to the zeroing of the invested capital. Every trader must be aware of this risk when using CFDs.
Investing in oil stocks through Contracts for Difference could generate strong gains thanks to leverage, but for the same reason it could lead to substantial losses.
Finally, we can say that being a very easy tool to understand, it can be within everyone’s reach, including novice traders, who intend to trade on the financial markets without having a high sum of money.
CFDs require a broker, we recommend two: eToro and IQ Option.
Investing in oil stocks on eToro
eToro broker allows its users to invest in oil stocks through CFDs. There are also numerous other stocks on the platform, also from other sectors.
eToro broker is also very popular thanks to the copy trading function. On the platform, beginner traders will be able to copy the operations started by the most experienced traders, called “gurus” by eToro and participate in their profits, should their operations be successful.
Each trader will be able to view in a totally transparent way all the regressed activity of the gurus, so that they can have a wider view. The user who intends to replicate the positions opened by the gurus will therefore be able to understand the strategy, the timeframe and the most used assets. The amount to be invested is at the user’s total discretion.
A demo version is available on the platform to allow new users to trade on the financial markets totally free of charge with non-real money and therefore without any risk.
Investing in oil stocks on IQ Option
The IQ Option platform is very intuitive and trading on oil stocks through CFDs is very easy. The broker had become famous thanks to the binary options, to which it owes its name, but then extended its range of products to offer to its users, including trading on stocks.
Digital options have been implemented on IQ Option, which allow traders to gain (but also lose) much more than binary options, since the return depends on the exact point of entry and exit of the operation. The classic options are no longer present on the platform.
A demo version is also available on IQ Option to allow novice traders to practice on the financial markets without risk and completely free of charge.