Oil prices have come down a great deal since the summer of 2008 as have all commodity stocks. In December 2008, OPEC just announced that they were going to cut oil production by 2 million bpd (barrels per day). That news from OPEC didn’t cause oil prices to go up, in fact oil prices dropped down again with other news that came out at the same time. That news was that the oil reserves of the US were higher than expected.
Different ways to invest in rising oil prices.
There are various ways to invest in rising oil prices, you can buy stocks in companies who do the exploring and the drilling for the oil. You can buy companies that sell the equipment to these companies to drill for oil, or you can buy companies that do the research to find places for the various oil companies to drill. And you can invest in the actual commodity oil itself.
These are the sectors in the oil industry that you need to look at, some web sites list companies under slightly different sectors phrases.
- Oil & gas drilling and exploration
- Oil & gas equipment and services
- Oil & gas pipelines
- Oil & gas refining and marketing
Exchange Traded Funds (ETF) of oil companies
You can buy an ETF (Exchange traded fund) that holds different oil companies in their portfolio, that way you can cover many different companies in the oil industry at the same time. By looking at the holdings of an ETF, you can then see exactly what they own in the oil industry. For example, DIG is the heavily traded oil ETF and its main holdings are:
- Exxon
- Chevron
- ConocoPhillips
- Schlumberger
- Occidental Petroleum
When you think oil prices are going to rise, you could buy the ETF with the symbol of DIG and by doing that, you would own a piece of the above mentioned oil companies all at once. You have to remember though, that this fund does not trade the price of oil or necessarily follow the price of oil, this fund trades the oil companies in their fund.
Oil Services Sector
One area of the oil industry is called the oil services sector, these are companies that provide oil drilling and production services, oil field equipment, support services and geophysical/reservoir services. The Philadelphia oil service sector index is the benchmark index to watch for these companies and this sector. The symbol is OSX, there is a total of 15 companies in this index. The list of companies in this index is at the end of the article,
Deep water and offshore drillers
There are the deep-water drillers as well, offshore platforms and the companies that look for the oil offshore. There is limited competition here and last summer there was a backlog of contracts. This group could be interesting to watch once the new congress and administration are in office since they recently voted to repeal the offshore drilling ban.
Some of the more notable companies in this sector are,
- Transoceanic (RIG)
- Noble Corp (NE)
- Diamond Offshore (DO)
- Atwood Oceanics (ATW)
- Bristow Group (BRS)
- Ensco International (ESV)
Buy oil
Not literally, but you can invest in oil through a couple of ETF’s with the symbols of OIL and USO. These ETF’s track the price of crude oil. With this you’re not investing in companies but the movement of the oil price itself.
Another ETF with a symbol of DXO is the crude oil double long, this is an ETF that if the price of oil moves up, this ETF moves up twice as much. It is more risky to the downside as well, meaning you can lose twice as much.
When you look for ETFs to buy in the oil industry, many places will have them listed under Natural Resources or Specialty Natural Resources.
- List of companies in the OSX oil index
- Good list of oil service companies
- Stock screen
- List of oil ETFs
