Stock markets across the world receive more publicity than the commodity markets, which is why the majority of irregular investors have at least some information about how to invest in stocks and shares, but often very little about ways to invest directly into commodities. Would you select well-known oil companies to invest in or choose a commodity, like crude oil, as an alternative?
Are The Supply and Demand Rules the Same?
You may know and understand, that having invested in the stock market, you will see the price of your chosen company rising and falling over the course of time. These changes are often after the reporting of a company’s financial results or their projected figures in the future, based upon some important news they wish to issue.
The performance of oil companies to invest in is often linked to the market’s variation in the price of the commodity, crude oil, but is also based on the performance of the oil company. Whereas, commodity prices change depending upon the supply and demand of the product. Where there is a higher demand for a commodity the price increases. As the demand reduces, so does the price of purchasing the commodity.
The supply of commodities also greatly affects their current pricing structure. When the supply of a commodity is severely limited, the price will increase, but when supply is overloaded and purchasers have a wide choice of where to buy, the price decreases.
How Does the Global Economy Affect Investments?
The most recent decline in global economies affected countries all over the world between 2006 and 2010. Many countries have still not fully recovered. Some central banks have reduced interest rates to an all-time low in an attempt to boost their economy. When interest rates are low, manufacturing costs are reduced because corporate loans cost less to fund the running of their organizations. This also can affect the production cost for commodities in the same way. This helps continue increased demands for commodities which is why stock and commodity markets often perform well when interest rates are far lower.
When you consider oil companies to invest in, they can be affected by both the stock and commodities markets.
For commodity-based companies available in the stock market, when they are able to purchase commodities at a lower price, the company’s earnings increase, as does their stock price. When commodity prices are high, purchasers and investors may decide not to purchase because prices look very high and expect consumers to purchase less because prices are high. As consumers purchase less, the companies that make the products using commodities will see their stock price drop and this may reflect in their profits.
For expert advice on oil companies to invest in or advice about crude oil, ask crudefunders.com how their experience has built a team of driller operators, geophysicists, legal experts, brokers and traders to offer great investment opportunities.