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Crude oil prices play a pivotal role in the global economy as they dictate shipping and manufacturing costs, together with the price of petrol and diesel.
The oil industry also forms a significant part of GDP (Gross Domestic Product) in many countries and employs millions of people worldwide.
Forbes Advisor UK tracks oil prices to help investors follow market trends.
Daily Data Table For Crude Oil Prices (30-day period)
Weekly Data Table For Crude Oil Prices (Last 6-month period)
Monthly Data Table For Crude Oil Prices (2-year period)
Yearly Data Table For Crude Oil Prices (10-year period)
Weekly Graph For Crude Oil Prices (Last 6-month period)
Monthly Graph Of For Crude Oil Prices (2-year period)
Yearly Graph For Crude Oil Prices (10-year period)
What is crude oil and how is it refined?
Crude oil is a naturally-occurring, thick mixture of hydrocarbons. It consists of animal and plant fossils trapped below sediment for millions of years, which is changed into a semi-liquid state by high pressure and temperatures.
Crude oil is drilled from wells and sent to refineries where it undergoes distillation to create more than 6,000 different products. These include nylon, PVC, polystyrene, polyurethane and polycarbonate, as well as liquefied petroleum gas (LPG), petrol, diesel and heating oil.
There are almost 100 oil-producing countries across the globe. The United States tops the list of the largest producers with a 15% share, followed by Saudi Arabia and Russia (both 13%), Canada (6%) and Iraq (5%), according to the US Energy Information Administration.
What determines the price of oil?
As with other commodities, the price of oil is a function of global supply and demand.
On the demand side, oil is a critical commodity for the global economy, providing the raw materials for fuel, electricity generation and manufacturing. As a result, demand is typically cyclical and falls during an economic downturn or recession.
In addition, the global transition towards clean energy is likely to reduce future demand for fossil fuels over the next decade and beyond.
On the supply side, one of the main factors is the influence of the Organisation of Petroleum Exporting Countries (OPEC) in setting production levels for its members.
Other factors impacting supply include extreme weather events, production issues and geo-political events such as the recent conflicts in Ukraine and the Middle East.
What are the options for investing in crude oil?
There are several options for investing in oil, either directly or indirectly, as follows.
Investing in an oil company
Investing in individual oil companies provides an opportunity to make a profit if the share price rises, and the large-cap oil companies often appeal to income-seeking investors due to their attractive dividend policies.
Oil activities are generally split into two categories:
- Upstream: the exploration and production of oil, including the identification of sites, drilling and extraction.
- Downstream: the refining of oil into various products and distribution to consumers, for example, in petrol stations.
By way of example, Shell and BP, two of the largest oil companies in the UK, have both upstream and downstream activities. In the US, ExxonMobil, Chevron and CoconoPhillips are the largest oil and gas producers.
However, this is a higher-risk option than investing in a fund due to the risk of a company underperforming.
Investing in an oil-based ETF
Another option is to invest in an exchange-traded fund (ETF) that tracks the price of oil, with the opportunity to make a profit if oil prices rise. They generally track the daily movement of a common benchmark such as West Texas Intermediate (WTI) or Brent Crude oil.
Alternatively, broader-based ETFs invest in a basket of oil companies, whose profits, and therefore share prices, are likely to be correlated to the price of oil.
Investing in an actively-managed fund
There are also a number of actively-managed funds that invest in the oil and wider energy sector. The majority hold a portfolio of energy companies involved in the extraction, refining and transportation of oil, gas and other commodities.
Frequently Asked Questions (FAQs)
Is investing in oil safe?
As with any asset, oil is not a ‘safe’ investment as its price can fall as well as rise. Oil is a volatile commodity that can experience significant price movements.
Investors should therefore be comfortable with the high-risk nature of investing in oil, particularly given the current geopolitical uncertainty.
As a rule-of-thumb, any investment in oil should form part of a balanced portfolio and commodities should not represent more than 5% of an overall portfolio.
What is the minimum investment amount?
This depends on the type of investment. Generally, it is possible to buy fractional units of an actively-managed fund although the minimum investment will vary by provider.
The minimum investment in an ETF or individual company will typically be one share, although some providers allow investors to buy fractional shares with smaller amounts of money.
