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Home / Oil Shares

Oil Shares

Oil shares, particularly the smaller oil exploration shares, are usually considered to be in the high risk, high reward sector. While possible to make a lot of money trading in oil shares, it is also possible to lose. That being said, oil and gas is widely traded and frequently recognised for its profit potential.

When someone says “oil” they are typically thinking of crude oil and natural gas. Crude oil, which consists of carbon, hydrogen, sulphur, nitrogen, oxygen, metals and salt, is distinguished as either sweet or sour. Sweet crude oil contains less sulphur, while sour crude oil contains more. Oil and natural gas are extracted from the ground, and then refined, before they are used in a variety of finished products including soaps, detergents, clothing, and more (petroleum products). Oil prices change depending on supply and demand. For instance, news of a new oil well can bring oil prices down, while a particular cold snap will increase the price of oil. As oil and natural gas are such important items in modern functioning, as well as somewhat volatile, investing in oil shares can be an interesting endeavour.

Large Cap, Small Cap?

Purchasing shares in oil companies, such as British Petroleum (BP) or Shell, have typically been the way investors gain exposure to oil. Yet oil shares also consist of small and medium sized companies involved oil extraction, transportation and refining. It is important to look at these companies’ access to mines, distribution methods, regional targeting and management teams when deciding whether or not to purchase. You may also want to consider company projections for oil demand going forward.

Oil prices, while commonly considered when looking at oil shares, are not a perfect indication of how that company will do. While an increase in the price of oil can benefit a company, as they are able to sell their final product at a higher price, it can also be detrimental. Oil companies require oil and gas for extraction and refining, which will increase their own costs. Many of the larger players are vertically integrated, meaning they have many functions and sources of revenue which do not benefit from higher oil prices.

Instruments in Oil

Instead of oil shares, an investor may want to consider an oil index. Indices often include shares in companies involved in the exploration, production, development and distribution of petroleum products. For private investors, the most popular way of gaining direct exposure to an oil price is via a Contract for Difference (CFD) or spread bet.

Purchasing the underlying oil is significantly less common than oil ETFs or oil shares. Large companies may purchase oil futures or options when requiring large amount of the commodity to run its own business, but this is much less common for a private investors to do so. Accendo Markets can provide you with an on-line trading platform to allow you to trade oil or oil shares using a CFD or spread bet.

The Industry

Oil companies often face negative PR that can impact the price of oil shares. For instance, there are many environmental concerns associated with oil extraction and transportation. Numerous spills have caused untold environmental damage. There are also significant health concerns for oil workers, both in extrication and refinement. As such, oil is a heavily regulated industry and there is ongoing debate between government and oil companies in terms of policy.

Trading or Investing

Before deciding to invest in or trade oil shares, find out about:

  • Identifying the buy signals
  • Identifying the next major oil find
  • Identify your exit points
  • How to trade oil shares on-line

Register for our daily Trading Opportunities for regular alerts on oil shares.

 

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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
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George

I have found Accendo staff very helpful,,and informed. I have traded with you for some years now and have no regrets. Keep up the good work!

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Shaun D

since signing up for Accendo I have had two traders, Mark and Sam. I have found both of these to be very informative about how CFD's work and they have made it very easy for me. Since working with Sam (last four months) my trading knowledge has improved and I can make more informative decisions about which Company's to invest with. Keep up the good work Sam.

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Anonymous

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Since I have been trading with Accendo Markets I have experienced much greater success than has been my experience with other trading companies mainly due to the help given by, what I consider to be my terminal with the trading floor, Mark, who has been most helpful in reminding me of the progress of my positions throughout the day and keeping me in touch with those positions so that I can more easily make successful trades when appropriate instead of missing out on opportunities through lack of attention. He draws my attention to the situations and enables me to make profitable trades. I am very happy with the situation at the moment and am enjoying the experience. Thomas Irving.

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I have been trading with Accendo Markets and James Abbott my account manager for coming on 5 years now, James Abbott the senior trader of Accendo Markets provides me with up to minute information when I need it and find him very easy and professional to deal with. Whenever I need to trade or am not sure about anything James is always their to help with any queries I may have. The Accendo Platform I find very easy to use and navigate although it has been slightly changed over the years but definitely for the better. Personal when I do trade 90% of the time, I rather telephone call to place my trade dealings and if James is not there to take my call I find others at Accendo like Sam, Lee take my trades and are. All in all everyone at Accendo Markets are amazing to deal with and my relationship with Accendo is just as I like it. Peter Petrou

Posted 4 years ago

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Posted 4 years ago

Brian R

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I understand how to make a profit with CFDs. I am restricted by the range of companies I have knowledge of. Although, I am not sure that is a big problem. Tom Robertson is a very fine man.

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