How to invest in oil in Australia

Investing in oil is simpler than you might think, this guide explains the best ways to do it.

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

The oil market has been volatile since 2020 and into 2021. But for some investors, falling prices are an opportunity.

So how do you actually invest in it?

In Australia there are four main options for investing oil: Buy oil stocks, Invest in oil ETFs, Trade oil futures, Invest in MLPs.

Invest in oil company stocks

A simple way to invest in oil is through stocks of oil companies such as BHP (BHP), Woodside Petroleum (WPL) or Oil Search (OSH). Generally speaking, as the cost of oil changes, so will the value of these companies - although this isn't guaranteed and depends on numerous other factors.

Developing an understanding of the energy cycle, the landscape in the industry and the impact of price fluctuations will help you determine valuable oil-related assets.

Accessing the market this way is simple because shares can be purchased with an online broker or financial advisor.

Pros
  • You can pick and choose a range of stocks and cash out when you want
  • A simple, accessible and versatile way to access the market
  • Oil stocks are volatile which means there's an opportunity to make high profits
  • Many oil stocks are well-established in Australia and pay dividends
Cons
  • Large businesses are involved in things such as refining, which don't actually benefit from higher oil prices, so oil company stocks don’t necessary move lock-step with the price of the commodity
  • Oil stocks are regarded as being more volatile than other sectors which means that they're high risk

Compare brokers to buy oil shares


Invest in oil ETFs

Exchange traded funds (ETFs) give access to a whole load of assets, without having to put all of your money into individual firms. The process is pretty much the same as buying stocks, but instead you're buying an oil "ETF", which typically tracks the performance of oil stocks or the price of oil itself.

Commodity-based oil ETFs allows you to track and profit from the price of oil while industry sector ETFs allow you to track the stock price of oil companies.

ETFs can be purchased and sold in a manner similar to stocks however they can allow investors to reduce risk by investing in the broader sector, rather than individual companies. If you need to brush up on ETFs, check out our guide on ETFs.

In Australia we have just one ETF that tracks the price of oil (OOO), however we do have several resources and commodity sector ETFs that are exposed to oil:

  • BetaShares Crude Oil Index ETF-Currency Hedged, Synthetic (OOO)
  • BetaShares Global Energy Companies ETF - Currency Hedged (FUEL)
  • VanEck Vectors Australian Resources ETF (MVR)
  • SPDR S&P/ASX 200 Resource Fund (OZR)
  • BetaShares S&P/ASX 200 Resources Sector ETF (QRE)
Pros
  • ETFs allow for instant diversification across the oil industry, at a low price.
  • ETFs have a better track record with providing safe, more reliable growth.
Cons
  • By placing your money in an ETF, you relinquish some control over the split of assets.

Compare brokers to buy oil ETFs


Trade oil futures

The futures market allows you speculate on future oil prices through derivatives contracts. With the traditional method of futures trading, you buy a contract to purchase physical oil at a future date at a specified price, which you can in turn sell. This allows you to profit from oil price fluctuations.

In Australia, futures are more often traded through a commodities CFD broker where you never actually trading physical oil. Instead, you're trading a contract that agrees to profit or loss depending on the price change of the underlying asset. This means you can profit from oil CFDs regardless of whether prices are rising or falling.

Futures and CFDs are extremely volatile and riskier than other investment options. Because they use leverage, both profits and losses and magnified, so it's best suited to more experienced traders.

The two most widely traded oil markets in the world are: West Texas Intermediate futures (US benchmark) and Brent crude futures (global benchmark).

Pros
  • Oil futures are among the most actively traded future on the market and hence the among the most liquid.
Cons
  • All futures are volatile investments and oil is no exception. No one can predict with any degree of certainty how the pice of oil will fluctuate.
  • Futures expire on a certain date. If you fail to exercise them prior to expiry they become worthless.

Compare brokers to buy oil futures


Invest in MLPs

Primarily existing in the gas and oil industry, A Master Limited Partnership (MLP) is a tax-advantaged corporate structure. It combines the tax benefits of a partnership – profits are taxed only when investors actually receive distributions – with the liquidity of a public company.

Typically, these companies own the pipelines that carry the commodity from one place to another.

Risks to MLPs could come from a slowdown in energy demand, environmental hazards, commodity price fluctuations, and tax law reform.

Pros
  • Companies can offer a very attractive dividend payment.
  • MLPs can easily be purchased through financial advisors or online brokers.
Cons
  • MLPs are subject to general market risk and low energy demand.
  • Stock prices don’t necessary move lock-step with the price of oil

Compare brokers to invest in oil stocks and ETFs

Name Product Standard brokerage fee Inactivity fee Markets International
eToro (global stocks)
US$0
US$10 per month if there’s been no login for 12 months
Global shares, US shares, ETFs
Yes
Zero brokerage share trading on US, Hong Kong and European stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and currencies from the one account.
IG Share Trading
$8
$50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares
Yes
$0 brokerage for US and global shares plus get an active trader discount of $5 commission on Australian shares.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, plus get access to 24-hour customer support.
Superhero share trading
$5
No
ASX shares, US shares
Yes
Australia’s lowest-cost broker for ASX shares and ETFs.
Pay zero brokerage on US stocks and all ETFs and just $5 (flat fee) to trade Australian shares from your mobile or desktop.
ThinkMarkets Share Trading
$8
No
ASX shares
No
Limited-time offer: Get 10 free ASX trades ($0 brokerage) when you open a share trading account with ThinkMarkets before 31 December 2021(T&Cs apply). $8 flat fee brokerage for CHESS Sponsored ASX stocks (HIN ownership), plus free live stock price data on an easy to use mobile app.
Bell Direct Share Trading
Finder AwardExclusive
Bell Direct Share Trading
$15
No
ASX shares, mFunds, ETFs
No
Finder Exclusive: Get 5 free stock trades and unlimited ETF trades until 31 Dec 2021, when you join Bell Direct. T&Cs apply.
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
SelfWealth (Basic account)
$9.5
No
ASX shares, US shares
Yes
Trade ASX and US shares for a flat fee of $9.50, regardless of the trade size.
New customers receive free access to Community Insights with SelfWealth Premium for the first 90 days. Follow other investors and benchmark your portfolio performance.
Saxo Capital Markets (Classic account)
$5
No
ASX shares, Global shares, Forex, CFDs, Margin trading, Options trading, ETFs
Yes
Access 19,000+ stocks on 40+ exchanges worldwide
Low fees for Australian and global share trading, no inactivity fees, low currency conversion fee and optimised for mobile.
CMC Markets Invest
$11
No
ASX shares, Global shares, mFunds, ETFs
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, ETFs and managed funds, plus access up to 15 major global and Australian stock exchanges.
HSBC Online Share Trading
$19.95
No
ASX shares, mFunds, ETFs, Bonds
No
Limited time offer: Get up to $100 in brokerage rebates on your first 5 trades when you sign up to a HSBC Online Share Trading account (T&Cs apply). Make trades online with brokerage fees starting from just $19.95 with an HSBC Online Share Trading account. Plus gain access to complimentary expert research, trading ideas and tools.
loading

Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage is the cost to purchase $1,000 or less of equities without any qualifications or special eligibility. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

Compare brokers to invest in oil futures

Name Product Minimum Opening Deposit Minimum Opening Deposit Commission - ASX 200 Shares Available markets Platforms
Vantage FX CFD
$200
$200
$8 AUD or 0.08%
Forex, CFD shares, Indices, Cryptocurrencies, Commodities
MetaTrader 4
MetaTrader 5
TradingView
Disclaimer: CFD Service. Your capital is at risk.
Vantage FX has some of the lowest CFD trading fees in Australia, plus you can place trades and find global trends through the new TradingView charts platform.
eToro CFD
US$200
US$200
No commission
Forex, Shares, Indices, Cryptocurrencies, Commodities, ETFs
eToro Trading Platform
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the largest social trading network in the world.
Plus500 CFD
$200
$200
No commission
CFD on Forex, Commodities, Cryptocurrency, Indices, Shares, Options and ETF's
Plus500 Trading Platform
Disclaimer: CFD Service. Your capital is at risk.
Trade CFDs on Australian and International shares, indices, cryptocurrencies, commodities and more.
IG CFD broker
$0
$0
0.08% with $7 minimum
Indices, FX, Shares, Commodities, Cryptocurrency, ETPs, Options, Interest Rates, Bonds
MetaTrader 4
ProReal Time
IG Trading Platform and Apps
L2
Disclaimer: CFD Service. Your capital is at risk.
Trade from over 15,000 markets with Australia's leading service for CFD trading and forex.
IC Markets CFD (True ECN Account)
US$200
US$200
0.1% per side
ASX shares, global shares, indices, commodities, forex, cryptocurrencies
MetaTrader 4
MetaTrader 5
cTrader
Disclaimer: CFD Service. Your capital is at risk.
Trade 230+ different products with fast execution under 40 milliseconds on average.
Saxo Capital Markets CFD
3,000
3,000
0.10% with $6 minimum
Indices, FX, Shares & ETFs, Commodities, Cryptocurrencies, Options, Bonds
SaxoTraderGO
SaxoTraderPRO
Disclaimer: CFD Service. Your capital is at risk.
Award-winning trading platfrom with extensive charting tools and reliable execution.
City Index CFD
$0
$0
0.08% with $5 minimum
ASX shares, 4,500 global shares, indices
MetaTrader 4
At Pro
Advantage Web
Disclaimer: CFD Service. Your capital is at risk.
Trade CFDs on indices, FX, global & Australian shares and commodities, plus access other markets such as metals, bonds and interest rates.
Blueberry Markets CFD Trading
US$100
US$100
$20 per month subscription plus 2% of trade size
Indices, ASX200 Shares, Commodities, Cryptocurrency
MetaTrader 5
Disclaimer: CFD Service. Your capital is at risk.
Bottom of the market fees on forex, CFDs and commodities with 24/7 quality customer service.
CMC Markets
$0
$0
0.09% with a $7 minimum
Forex, Indices, Commodities, Cryptocurrencies, Global shares, ASX shares, Bonds
CMC Next Generation CFD, MetaTrader 4
Disclaimer: CFD Service. Your capital is at risk.
Share CFD and forex ideas with other traders and take your strategy to the next level with over 100 technical indicators and charts on CMC’s mobile-friendly Next Generation platform.
Pepperstone CFD
$200
$200
No commission
ASX shares, global shares, indices, cryptocurrencies, commodities
MetaTrader 4
MetaTrader 5
cTrader
Disclaimer: CFD Service. Your capital is at risk.
Trade stock indices on the global market, via Pepperstone's MetaTrader 4 and cTrader client terminals.
loading

Compare up to 4 providers

Trading CFDs and forex on leverage is high-risk and you could lose more than your initial investment. It may not be suitable for every investor. Refer to the provider’s PDS and consider the risks before trading.

What are the risks of investing in oil?

While long-term investments in oil companies can be highly profitable investors should understand the risk factors before making investments in the sector. These risks include:

  • Price volatility: large price fluctuations can occur daily due to unpredictable influences such as supply and demand.
  • Dividend cuts: If a company is unable to earn enough revenue to fund payments to investors dividend can be cut.
  • Oil spill risk: Accidents such as oil spills can cause a company's share price to drop significantly. In 2010 BP saw a decline of over 55% to their stock in the wake of the Deepwater Horizon oil spill.

Frequently asked questions

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

More guides on Finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site