Oil Investment : Best Way To Invest In Oil

You've heard it many times : oil prices are falling. You see an opportunity there and therefore want to know what is the best way to invest in oil. We will see what affects the oil price and a few different ways you have to invest in oil before it goes up.

The barrel is below $40.

# What affects the oil price?

• Supply and Demand

This is basic. The more there are, the less it is valued. The U.S production has almost double over the past years, cutting importations, and therefore, Canada's and Venezuela's oil need to find a new home. Even falling economies like Russia's keep pumping oil into the market. Thousands lost their jobs and many economies like Venezuela's are collapsing (96% of its revenue comes from oil).

• China

China is essential to the oil industry. In May it surpassed the US as the world's largest importer. As the surplus in the market makes the barrel cheaper, add to that a slowing China and you'll get a very cheap oil. The bigger the economy, the harder to keep a steady growth, as you can see today.

• OPEC (Organization of the Petroleum Exporting Countries)

This club is made of rich oil countries and some, as Venezuela, want it to cut production so it can balance its budget and not lost a lot of money. On the other hand, countries like Saudi Arabia are refusing to do, in order to put the US production under pressure and gain some market share over the long term.

 # How to profit from it?

• Invest in a mutual oil fund like :
• Vanguard Energy Fund Investor Shares, which is a risky fund, investing up to 80% of its assets, but investors keep a higher percentage of their return. 
• Fidelity® Select Energy Portfolio. Even if the fee are above average, it has returned 5,69% over the past three years.

• Avoid emerging markets. As the chart above shows, emerging markets are in turmoil, from Brazil with its political and economic problems, to Russia with its ruble and oil prices falling.
• Invest in airlines. Oil takes a large chunk of their expenses.
• Simply, buy the barrel and sell it when it's at $150.