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Buying Oil As An Investment - What About Buying Oil Shares?

Recently the global stock markets have been suffering from the ever increasing price of oil, so what about buying oil shares in oil companies as an investment? Its probably more profitable to join the ever increasing amount of investors who are actually investing in oil via call options - contracts that give holders the right to buy crude oil at a predetermined price and date.

The buying and selling of crude oil has changed dramatically from the early 1920s when international companies bought supplies from large producers, mainly in the Middle East. Back then, contracts were based on a tax formula that guaranteed revenue to host governments in producing countries such as Saudi Arabia.

In 1960, Iran, Iraq, Kuwait, Saudi Arabia and Venezuela formed the Organization of Petroleum Exporting Countries - OPEC with the aim of influencing world crude oil prices by setting production levels.

Today, the price of crude oil is set by the global marketplace where it is bought and sold through key market exchanges in New York, London and Dubai. The New York Mercantile Exchange is the world’s largest physical commodity futures exchange. Through its NYMEX Division, the equivalent of 100 million barrels of crude oil are traded daily.

Prices quoted for transactions on the Exchange form the basis for prices that people in Canada, the United States and many other countries pay for crude oil, heating oil, gasoline, natural gas and many other commodities. Day and night, minute by minute, these prices change, ultimately affecting the prices that consumers pay for thousands of energy related products.

Traders turn to the cash based spot market when immediate delivery, usually within 30 days or less is required. Spot market dealings involve a one-time market transaction where a commodity is purchased “on the spot” at current market rates.

Note: Live Oil Prices website provides the latest world oil news stories and general information on worldwide oil commodities trading. Our website is a free service and is provided free to use as a public interest website, and is not intended as a means of providing investment advice.