Crude Oil
Investing in Crude Oil
The importance of crude oil cannot be overstated. It is a major source of energy, generating heat and powering various types of vehicles and machinery, and is also used as a component in many of the products we use every day, including plastics, paints, and cosmetics. Concerns about the damage it does to the environment mean crude oil isn't favorable with everyone. However, most agree that we currently cannot live without it and that no longer extracting and refining crude oil would lead the global economy to grind to a halt.
Investors may purchase two types of oil contracts: futures contracts and spot contracts. To the individual investor, oil can be a speculative asset, a portfolio diversifier, or a hedge against related positions.
Investors may purchase two types of oil contracts: futures contracts and spot contracts. To the individual investor, oil can be a speculative asset, a portfolio diversifier, or a hedge against related positions.
The price of the spot contract reflects the current market price for oil, whereas the futures price reflects the price buyers are willing to pay for oil on a delivery date set at some point in the future. The futures price is no guarantee that oil will actually hit that price in the current market when that date comes. It is just the price that, at the time of the contract, purchasers of oil are anticipating. The actual price of oil on that date depends on many factors. Most commodity contracts that are bought and sold on the spot markets take effect immediately: Money is exchanged, and the purchaser accepts delivery of the goods. In the case of oil, the demand for immediate delivery versus future delivery is limited, in no small part due to the logistics, The Wealthxchange247 has made it possible for our esteem investor to diversify its investment on crude oi.