What makes crude oil a lucrative sector for investors and traders?

Investments
Photo Credit: Olivier Le Moal

We are living in a pandemic era where even the mainstream investment portfolios have failed to provide acceptable returns. Even those investors with a high net worth are now looking for diversifying opportunities in search of higher returns.

A joint venture of natural gas and crude oil meets several objectives that make it an attractive sector for many investors and traders equally. One of the main reasons behind the oil industry being a safe place for investing is that the demand for oil and gas is never-ending as these commodities are the main energy source since the industrial revolution. Also, there is no replacement of these commodities shortly.

The oil investment sector has its risk profile and it is essential to partner with some reliable organization that has higher chances of providing oil and gas investment revenue on your investments. Texas being the biggest oil producer in the United States harbors many upstream oil exploration firms such as Legacy Exploration. It is an investment firm in the oil industry that can provide you with expert help to make the right investment tactics to generate high ROI in this industry.

Factors giving crude oil an attractive investment portfolio

1. A chance to generate high ROI and a resource of passive income

  • The sector has seen a lot of improvement in technology shifting to a more infield drilling that has mitigated many risks that follow investment in this field.
  • Energy consumption is steadily increasing worldwide and is expected to rise by 50% by 2035.
  • This is why there are huge opportunities for earning long-term passive income.
  • To earn a high ROI, try making small and targeted investments in already established and proven fields.

2. Attractive tax incentives

  • There are many tax incentives provided by IRS to investors funding natural gas and crude oil production on the domestic fund.
  • You can save 60-80% of well costs within the first year if you are investing in a drilling program.
  • They also provide a 15% depletion allowance by allowing the same amount of cash flow on the property to be tax-free.

3. It remains unaffected by short-term fluctuations in the stock market

  • The crude oil ownership provides a buffer against stock market fluctuations.
  • This happens mainly because of 2 reasons.
  • Firstly, the oil industry shares a positive correlation with market inflation.
  • Secondly, there is a lower correlation of energy investments in production and exploration with traditional assets making it more stable under fluctuating market parameters.

4. Continuous demand

  • Every country is trying to gain independence in the energy-producing sector.
  • This is why the demand for natural gas and crude oil is increasing steadily despite any market crashes in the recent past.

The investors should take direct ownerships in oil-producing properties to ensure better returns, make a passive income source, and mitigate risks that are accompanied by short-term fluctuations.

On the other hand, you must see this as a long-term project and liquidate your fund accordingly to allow for expenses that go into the maintenance of wells and repair of drilling equipment.


Augusta Health Augusta Free Press Kris McMackin CPA
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