Oil and natural gas prices are down, what do brokers say?

Energy resources play a leading role in today’s economy. The level of development of the productive forces of each state is determined to a large extent by the scale of energy consumption. The important role of energy resources is evidenced by the fact that more than 70% of the world’s minerals are energy sources.

The main types of energy resources are coal, oil, natural gas, hydroelectric power, and nuclear power. Oil is the most important natural resource for humanity. An oily flammable liquid with a specific odor belongs to fossil fuels and is extracted together with associated gas from a depth of several tens of meters to 5-6 kilometers. Oil is one of the main commodities, the basis of the modern economy. This raw material has a serious impact on financial markets. We will tell you whether it is worth investing in oil, what tools to use for this, and what risks investing in oil carries.

And also we will consider all the features of Oil and natural gas prices are down, what do brokers say?

The importance of oil in the global economy.

The advantages of oil and gas as energy sources include the relatively low cost of production and the possibility of waste-free processing to obtain a variety of fuels and chemical raw materials. However, the resources of oil and gas are limited. They are significantly less than the reserves of coal, oil shale, and tar sands.

Oil remains the number one fuel for the global economy. Its share in the structure of world energy consumption is about 31%, which exceeds that of gas, coal, and even more renewable energy sources. Until 2040, this leadership of oil will most likely remain, although it will gradually lose ground to other energy carriers.

Investing in oil is interesting not only because of the technological role of the mineral, but also because of the peculiarities of the market: it is one of the most developed markets that has everything – both diversified demand and supply with numerous buyers and sellers actively competing on a global scale, and a developed system of financial derivatives and advanced regulatory mechanisms. What is lacking is stability, which to some extent undermines the attractiveness of the oil industry.

How can investors trade oil and natural gas?

At this point, you need to talk about how oil trading takes place and what is needed for this.

The commodity stock market offers a wide range of investment opportunities, including investing in oil, natural gas, and ETF stocks. However, investing in oil stocks can be tricky.

Demand for oil and natural gas remains stable and even growing, despite growing investment in renewable energy. Most of the world’s countries are heavily dependent on oil and petroleum products to maintain their infrastructure. At the same time, oil prices are quite volatile. At the beginning of 2018, oil stock prices were twice as high as in 2016. That is why it is so important that investors evaluate the risks, and rewards and strive for a balanced investment portfolio.

Against the backdrop of the current geopolitical situation, prices for natural resources have mainly risen in recent months, followed by temporary setbacks. We are witnessing a full-fledged commodity growth cycle. This fact makes oil and gas an attractive resource for investment. You can invest in this sector through futures.

There is a wide variety of commodities, which include oil, natural gas, coal, fuel oil, and other petroleum derivatives.

It is necessary to highlight the main categories that best reflect the industry:

• Brent and WTI oil;
• natural gas, futures for which are traded on the NYMEX exchange;
• coal, including coking coal;
• derivatives of petroleum products, which include fuel oil and gasoline;

Each separate category of raw materials has its market and stock exchanges where it is possible to buy and sell them. For example, you can invest in oil and other resources on the DotBig broker site.

Why are oil and natural gas important for investors?

As with any category of investment, investing in oil, gas, or raw materials is expected to generate a return. The continuous changes in demand and supply for these resources, as well as the significant price changes that have occurred throughout the history of commodity trading, show the promise of this direction. Moreover, changes in prices for energy resources, whether it be gas or oil, have an extremely high impact on the economies of individual countries and companies.

In this case, investments in commodity markets should be considered not only as a tool for generating income but also as an important tool for minimizing risks and portfolio diversification. Today, thanks to the development of exchange infrastructure and technologies, almost every individual investor can invest in commodities.

Withdrawal from investment in oil could also lead countries currently drilling and extracting fossil fuels to try to capture even more of the market they already control.

For example, Raoul Le Blanc, vice president of unconventional oil and gas at IHS Markit, stated that:

“As for the largest oil and gas companies, although their production volumes are significant, they do not dominate the market. Most of the world’s oil is controlled by countries, in particular Saudi Arabia, Iraq, Iran, Russia, and China. These governments own real resources and are likely to attract private companies to develop and mine them.

If you want to know why are crude oil prices so high, you can get more information in the DotBig educational section.

What is the opinion of brokers about oil and gas prices?

At this point, you need to tell and show (you can insert quotes) what will happen to oil prices in the future. (add charts)

In recent months, against the background of the geopolitical situation, oil prices are unstable. But some representatives of the sphere foreshadow the growth of cents for this resource. For example, Stephen Brennock, senior analyst at PVM Oil Associates in London, said there was some upside potential for oil prices after the severe losses in September.

“A further surge in trading activity, coupled with a tightening of near-term oil fundamentals, could well send oil prices down to $100 a barrel. Those who are optimistic have survived the summer of pain, but ahead is the winter of hope and expectation.

Analysts at Goldman Sachs also predict that Brent will reach triple digits over the next three months, and then the price will rise to $105 over a six-month horizon. And the US investment bank expects WTI to jump to $95 around the end of the year and then hit $100 over the next six months.

Representatives of DotBig LTD recommend investing in the commodity market to obtain long-term profit. Today there are many reasons why oil prices are so high, but prices will rise even more over time.

Should I invest in oil?

Oil volatility creates many trading opportunities for traders and can be used to diversify a portfolio and hedge investments in other assets. But is it worth investing in oil? Gas traders have three options: trade futures, trade contracts for difference (CFDs), or invest in companies or ETFs related to the oil sector.

At a time of uncertainty in the markets, the coronavirus pandemic continues, inflation is rising worldwide, conflict of unbelievable proportions has erupted in Eastern Europe, volatility has skyrocketed and oil has begun to move higher. If you are wondering who sets gas prices, then the answer to this question is ambiguous. But in most cases, prices are formed against the backdrop of the political situation in the world.

Growing demand for oil in light of the gradual recovery of the global economy and the easing of restrictions imposed in connection with the pandemic contributes to the growth of prices for “black gold”. At the same time, OPEC + members have constantly held back the pace of oil production, and the supply chain is still experiencing problems due to the pandemic. All this has led to the fact that over the past months, crude oil has been gaining strength. The latest surge in prices came as tensions in Eastern Europe reached a boiling point.

Given all of the above factors, it is likely that oil prices will continue to rise and volatility will increase. Remember that volatility increases risk, so it is important to manage risk when investing in oil in the stock market. Below you can find the most common questions investors have about investing in oil.

If you are interested in investing in oil, choose a reliable broker. DotBig is one of the best markets where you can buy oil futures. Use social trading tools to find the right time to invest in the commodity market.

FAQ

How profitable is it to buy oil?

While oil prices have fallen, you can take the opportunity to invest in this in the commodity market. In the near future, the cost of oil may rise and you can make good money on this.

How profitable is it to buy natural gas?

Natural gas is a risky investment because, as with oil, the cost of gas depends on the political situation in the world. Now, while the price of gas has fallen, you can invest in it.

Is it worth investing in commodities?

In general, raw materials remain an attractive investment as long as there is demand for it.

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• Source: Plato Data Intelligence: Platodata.ai