How to invest in oil futures and ETFs?

Those interested in investing in oil have various options, from direct methods like purchasing oil futures, which are high risk and very volatile, to purchasing lower-risk energy sector exchange-traded funds (ETFs).

Futures trading requires a strong level of skill, and can be difficult for the average investor to understand. But for those in the know, here are some futures contracts offered on the NYMEX: Light Sweet Crude Oil, Brent Crude, E-mini Crude Oil, the Crude Oil Volatility Index (INDEXCBOE:OVX) and RBOB Gasoline.

As mentioned, ETFs are a great way to invest in the oil sector at a lower risk. That’s largely because they allow investors to gain exposure to a diversified portfolio while only having to track a single stock.

Options in the ETF sector are varied, and include the iShares Global Energy Sector ETF (BMV:IXC) and mutual funds like the T. Rowe Price New Era Fund (MUTF:PRNEX). Other oil ETFs available are the United States Oil Fund (ARCA:USO), the United States Brent Oil Fund (ARCA:BNO), the Energy Select Sector SPDR (ARCA:XLE), the United States 12 Month Oil Fund (ARCA:USL), the Invesco DB Oil Fund (ARCA:DBO), the United States Gasoline Fund (ARCA:UGA) and the SPDR S&P Oil & Gas Explore & Product (ARCA:XOP).

How to invest in oil stocks?

Of course, there’s also the option of investing in oil exploration, development and production companies. Again, investors will need to do their own research to determine which stocks meet their criteria.

Dividend-paying stocks are often popular, and US-listed oil stocks offering strong dividends include producers like Diamondback Energy (NASDAQ:FANG), ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX), Enbridge (NYSE:ENB) and EOG Resources (NYSE:EOG).

Canada is home to its own contingent of dividend-paying oil stocks, with options such as Orca Energy Group (TSXV:ORC.B,OTC Pink:ORXGF), Alvopetro Energy (TSXV:ALV,OTCQX:ALVOF), Peyto Exploration & Development (TSX:PEY,OTC Pink:PEYOF), Suncor Energy (TSX:SU,NYSE:SU) and Topaz Energy (TSX:TPZ,OTC Pink:TPZEF).

The top-performing oil stocks by share price performance may also be worth checking out. Click here for the Investing News Network's latest list of gainers on the TSX and TSXV.