How to Invest in Oil UK – Invest in Oil Today!

Fact Checked by Gary McFarlane

The price of oil has gone from lows of $19 per barrel in April 2020 to highs of $83+ in late 2021. This presents plenty of investment and trading opportunities for your portfolio.

In this guide, we explain the nuts and bolts of how to invest in oil in the UK – alongside an overview of which trading strategies and FCA-regulated brokers to consider.

#1 Broker to Invest in Oil UK – eToro

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How To Invest in Oil UK – Choose a Broker

If you’re looking to invest in oil in the UK – you will first need to select a suitable commodity broker. Below, you will find an overview of the best online platforms that allow you to invest in oil.

  • eToro – Overall Best Place to Invest in Oil UK
  • Capital.com – Trade Oil at 0% Commission
  • AvaTrade – Credible Broker to Trade Oil With Leverage

Looking for a closer insight into what each of the above oil brokers offer? If so, you will find full reviews further down in this guide.

How to Invest in Oil UK – A Quick Guide For 2021

If you’re looking to get in on the action by investing in oil right now – the step-by-step walkthrough is for you. By following the outlined steps, you can invest in oil in the UK at eToro on a 0% commission basis.

  • Step 1: Open an Account with eToroThis FCA-regulated broker allows you to open an account in minutes. You simply need to click the ‘Join Now’ button on the homepage, enter your personal information, and confirm your email address and mobile number.
  • Step 2: Upload Your ID – You will need to upload some ID if you are looking to deposit more than $2,250 – or about £1,600. If not, you come back to this step at a later date.
  • Step 3: Deposit Funds – The next step is to deposit some money into your newly created eToro account. You can do this instantly with a debit/credit card, Paypal, or Skrill. Bank transfers are also supported – but this payment method can take longer to process.
  • Step 4: Search for Oil – At eToro, you can invest in oil via CFDs, stocks, or ETFs. Find a suitable oil instrument for your goals and proceed to click the ‘Trade’ button.
  • Step 5: Invest in Oil – Finally, an order box will appear. Here, you simply need to enter the amount of money that you wish to invest in oil. The minimum trade value is just $50 (about £35) at eToro – which is perfect for beginners. To complete your investment, click the ‘Open Trade’ button.

From start to finish, the above steps will allow you to invest in oil in the UK in under five minutes. If you need a more detailed walkthrough, you will find this by scrolling down.

67% of retail investor accounts lose money when trading CFDs with this provider.

Where to Invest in Oil UK  – Full Broker Reviews

If you’re thinking about the best place to invest in oil in the UK – you will invariably need to go through an online broker that offers commodity trading markets. Fortunately, you’ve got plenty of options in this respect. But, you need to spend some time assessing the broker’s fee policy, list of supported oil markets, regulatory status, and more. 

To fast-track the process for you, below we offer full reviews of the best brokers in the UK that allow you to invest in oil.

1. eToro – Overall Best Place to Invest in Oil UK

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Our number of pick for the best commodity broker that allows you to invest in oil in the UK is eToro. This platform was first launched in 2007 and is now home to over 20 million investors – many of which are situated in the UK. The overarching reason that we like eToro is that the broker offers a user-friendly and low-cost way to invest in oil. Most importantly, eToro is authorized and regulated by the FCA and your capital is covered by the FSCS protection scheme.

To invest in oil at eToro, you will first need to register an account and deposit some funds. You can choose from a debit/credit card, e-wallet, or bank account transfer for this purpose – and end-to-end, this should not take you more than five minutes. Once your account is ready to go, you can choose from a wide variety of oil investment products. The most popular option in this respect is to trade oil via CFDs. The CFD instrument that you trade will mirror the actual price of oil-like-for-like – so you simply need to place an order to gain exposure.

etoro commodity trading

You can, however, also invest in oil at eToro via stocks. For example, you might consider buying some stocks in BP, Exxon Mobil, or even Saudi Aramco. In fact, eToro offers thousands of stocks from 17 UK and international marketplaces – so diversification into the oil industry is easy with this broker. Alternatively,  you can also invest in an exchange-traded fund (ETF) that focuses on oil, or the wider energy sector. When it comes to fees, eToro offers extremely competitive investment rates across the board.

For instance, if you decide to trade oil CFDs, you can do so on a spread-only basis. Or, if you want to invest in oil stocks and ETFs – this can be done without paying any commissions. Plus, if the stock or ETF is UK-listed, you will also avoid the need to pay any stamp duty tax, as this is waivered by eToro. We should also mention that eToro offers a copy trading service – where you will select an experienced investor and elect to mirror their future positions. Finally, you can invest in oil online or via the eToro app through a single account.

Pros

  • Invest in stocks at 0% commission and ZERO stamp duty
  • Minimum investment per stock investment is $50
  • Supports debit/credit cards, e-wallets, and UK bank transfers
  • Regulated by the FCA and covered by the FSCS
  • Used by over 20 million people
  • Perfect for beginners
  • Social and copy trading tools

Cons

  • Perhaps too basic for technical traders
  • No support for MT4 or MT5

 67% of retail investor accounts lose money when trading CFDs with this provider.

2. Capital.com – Trade Oil at 0% Commission

capital.com review

Capital.com is a regulated online broker that specializes in CFDs and spread betting. Both of these financial instruments allow you to trade oil without taking direct ownership of anything. This is, perhaps, the most convenient and flexible way of gaining exposure to the global oil industry. Al you need to do at Capital.com is choose from a buy (long) or sell (short) order on your chosen oil instrument and you are good to go. Best of all, when you trade oil at this top-rated broker, you will be doing so on a 0% commission basis.

You can also deposit and withdraw money for free at Capital.com and if using a debit/credit card or supported e-wallet, the minimum funding amount is just £20. Otherwise, the minimum shoots up to £250 when electing to transfer funds from your UK bank account. Nevertheless, when you trade oil at Capital.com, you will have the option of applying leverage to your position. As per FCA limits, you will be offered a maximum leverage ratio of 1:10.

capital.com review

In simple terms, this means that by risking £300 on an oil trading position, you can increase your exposure to £3,000. You should, however, explore the added risks of trading with leverage before utilizing this investment tool. In addition to spot price markets, Capital.com also allows you to trade oil stocks and relevant ETFs. The platform also offers financial instruments that track forex prices, indices, precious metals, and more. Finally, Capital.com is licensed by the FCA, ASIC, CySEC, and NBRB – so safety shouldn’t be a concern.

Pros

  • Top-rated spread betting and CFD broker
  • Licensed by the FCA, ASIC, CySEC,and NBRB
  • £20 minimum deposit (debit/credit cards and e-wallets)
  • 0% commission on all markets
  • Tight spreads and no fee on deposits or withdrawals
  • Supports thousands of financial markets
  • Convenient for newbies

Cons

  • Experienced traders might consider the broker too basic
  • £250 minimum deposit on bank transfers

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.77% of retail investor accounts lose money when trading spread bets and/or CFDs with this provider.

3. AvaTrade – Invest in Oil via Leveraged CFDs

avatrade review

AvaTrade offers an equally notable CFD trading service where you can speculate on the future value of oil with ease. Getting started takes minutes and you only need to meet a minimum initial deposit of £100. You can do this with a UK bank transfer or debit/credit card on a fee-free basis. At AvaTrade, you will have plenty of oil markets to choose from. This includes spot prices that mirror both the Brent and WTI crude oil benchmark. Additionally, if you understand how oil futures work – this is another financial market that might be of interest.

Irrespective of the CFD instrument that you choose to trade, this top-rated broker offers 0% commissions and super-tight spreads. Furthermore, and much like eToro and Capital.com, AvaTrade allows you to enter buy and sell positions with leverage. Once again, UK regulations stipulate that retail clients can apply leverage of up to 1:10 when trading oil CFDs. If at some point in the future you believe that oil is likely to reverse in price, AvaTrade allows you to short-sell the commodity via a sell order.

avatrade review

This offers great flexibility from a trading perspective. In terms of other markets supported by AvaTrade, you can also trade stocks, indices, ETFs, forex, metals, and more. You can choose from a variety of platforms too – with AvaTrade supporting MT4, MT5, and its own native web trader. There is also a mobile app compatible with iOS and Android – AvaTradeGO. Finally, AvaTrade is authorized and regulated by financial bodies in seven different jurisdictions and the brokerage site is planning to go public in the very near future.

Pros

  • Regulated in seven jurisdictions
  • 0% commission on all supported markets
  • Offers spread betting and CFD instruments
  • Minimum deposit of just £100
  • Free demo account
  • Supports MT4 and MT5

Cons

  • Spread betting department limited to just 200+ financial markets
  • No support for instant bank transfers

Trading CFDs and FX Options entail risk and could result in the loss of your capital.

How to Invest in Oil UK – Detailed & Explained in Full

Towards the top of this guide, we provided a short overview of how to invest in oil at eToro. But, if you’re new to this financial marketplace, you likely need a more detailed and thorough walkthrough.

Here’s what you need to do to invest in oil step-by-step.

Step 1: Open a Broker Account

To benefit from eToro’s low-cost and user-friendly investment services, you will first need to register with the broker. This should only take a couple of minutes and simply requires some personal details from you.

how to join etoro

For instance, you need to provide your full name and home address, alongside a mobile number and email. You also need to choose a username and password. You will also be asked to complete a quick KYC procedure for verification purposes. This will require a copy of your passport/driver’s license and a proof of address (e.g. bank statement).

67% of retail investor accounts lose money when trading CFDs with this provider.

Step 2: Deposit Investment Funds

You can now deposit some funds. eToro accepts a number of instant payment methods – including debit/credit cards and e-wallets like Paypal. You can also elect to deposit funds via a UK bank transfer.

Deposit Funds

Take note, the minimum first-time deposit at eToro amounts to just $50 – which is great if you are only planning to invest a small amount of money.

Step 3: Choose Oil Investment Market

As we covered in our eToro review further up on this page, this top-rated broker offers plenty of oil markets. This includes oil-related stocks and ETFs, as well as CFDs.

trade oil at etoro

We would argue that the easiest way to gain exposure to oil in the UK is vis CFDs – which are financial instruments that track the spot price of this commodity. As such, all you need to do to find this market is enter ‘Oil’ into the search box before clicking on ‘Trade’.

Step 4: Invest in  Oil

You will now be asked to complete an investment order box. At eToro, the broker keeps things simple. This is because you only need to specify the amount of money (in US dollars) that you wish to risk on the trade.

how to trade oil etoro  If you wish, you can also apply leverage of up to 1:10 on your oil trade and even set up limit, stop-loss, and take-profit orders. Finally, to enter your oil position – click the ‘Open Trade’ button.

Best Ways to Invest in Oil UK

It is important to remember that there are many financial instruments that allow you to invest in oil in the UK. Each marketplace comes with its own pros and cons, so it’s wise to do a bit of research before you risk any capital.

In the sections below, we discuss the best ways to invest in oil from the comfort of your home.

Trade Oil CFDs

Without a doubt, the best way to invest in oil is via CFDs. The word ‘invest’ is somewhat misleading in this respect, you won’t actually own the underlying asset. This is, however, a good thing – as you likely have no interest in taking delivery of oil barrels. Instead, the overarching role of a CFD instrument is to track the value of oil in real-time.

In other words, if the spot price of oil is $79.50 per barrel, this will be reflected in the value of your CFD position. Then, if oil increases by 1.5% the following day, as will your CFD. The benefits of trading oil through a CFD instrument are plentiful.

For example:

  • You can trade oil CFDs with leverage of up to 1:10 in the UK. This means that you can amplify the value of your trade by 10x.
  • You also have the option of going long or short when trading oil CFDs. This allows you to profit from both rising and falling markets.
  • As you won’t own the underlying asset, oil CFDs can be traded at 0% commission alongside tight spreads

The main drawback with oil CFDs is that this financial instrument attracts overnight financing fees. This means that for each day you keep the position open – a small fee will apply. This shouldn’t be an issue if you are a short-term trade. But, if you want to invest in oil in the UK in the long run, you might want to consider stocks or ETFs instead.

67% of retail investor accounts lose money when trading CFDs with this provider.

Best Oil Stocks to Invest in

Another option to consider is to invest in oil stocks. These are simply companies that operate in the oil industry – so you will be buying shares in the respective firm. Some of the largest oil stocks that you can invest in include:

  • BP (UK)
  • Royal Dutch Shell (UK)
  • PetroChina (Hong Kong)
  • Exxon Mobil (US)
  • Total SE (France)
  • Saudi Arabian Oil (Saudi Arabia)

All of the above stocks can be invested in at eToro at 0% commission. Plus, if electing to invest in UK-listed oil stocks like BP or Royal Dutch Shell, you won’t need to pay any stamp duty tax – as this is waivered by eToro.

It is important to know that in theory, there is a direct correlation between oil stocks and the spot price of the commodity. That is to say, if the price of oil is higher, then this will benefit companies operating in this industry – as they can apply higher profit margins. However, this isn’t always the case – as you also need to factor in the fundamentals of the company itself.

For example, you might invest in an oil stock that is suffering from increasing production costs, which in turn, can negatively impact the price of its shares.

67% of retail investor accounts lose money when trading CFDs with this provider.

Invest in Oil ETFs

If you are looking to take a more diversified and hands-off approach, you can also invest in oil in the UK via an ETF. In its most basic form, the ETF provider will purchase stocks that operate in the oil industry. In other cases, the ETF might hold oil futures and options.

One of the most popular ETFs in this field is offered by SPDR. The SPDR S&P Oil & Gas Exploration & Production ETF has over $4.2 billion worth of relevant stocks in its portfolio and over the prior 12 months has generated returns of 133%. Some of the largest holdings in this ETF include SM Energy Company, Callon Petroleum, Marathon Oil Corporation, and Devon Energy Corporation.

oil etf

Once again, FCA-regulated broker eToro offers several oil ETFs on a 0% commission basis and the minimum investment required is just $50.

67% of retail investor accounts lose money when trading CFDs with this provider.

Is Oil a Good Investment?

Since oil hit lows of $19 per barrel in April 2020 – the commodity has witnessed a price increase of over 336%. This represents incredible gains in such a short period of time. However, oil cannot increase indefinitely, so you need to perform adequate research before proceeding with an investment.

To ensure you only invest in oil in the UK with your eyes wide open – here’s what you need to consider.

How is Oil Priced?

First and foremost, before you invest in oil, you need to have a firm understanding of how this marketplace is priced. In a nutshell, oil is priced in US dollars and there is a global benchmark that the markets follow. Furthermore, the price of oil is quoted per barrel. In theory, the value of oil is determined by market forces.

That is to say, when demand exceeds supply, you should expect the price of oil to increase. And vice-versa, increased supply could see the price of oil decline. However, it is important to note that the production of oil is concentrated by a small number of nation-states – most of which are located in the Middle East.

oil trading etoro

In fact, this small collection of oil-producing countries is represented by OPEC (Organization of the Petroleum Exporting Countries). If you are going to invest in or trade oil, you should know the role that OPEC plays in this market. Put simply, if OPEC wants to increase the global price of oil, they can simply cut back on production levels.

On the other hand, if OPEC wants to fend off competition from the likes of the US, it can increase production levels to reduce global prices. Either way, this illustrates that the value of oil is somewhat manipulated. This shouldn’t prevent you from accessing the oil market. It should, however, encourage you to keep tabs on important oil-related news and developments – especially in the case of OPEC.

Oil Price History

Over the past 10 years, the price of oil has hovered between $19 and $113 per barrel. This represents a huge disparity in value and thus – you need to tread carefully when trading this commodity. In fact, the spot price of oil can be extremely volatile. Most importantly, oil should never be viewed as a long-term investment.

Instead, this commodity is best viewed as a short-term trading instrument. Your task is to simply follow the trend. So, when demand for oil increases, you might consider placing a buy order to capitalize on this. Similarly, when it appears that oil is reaching a pricing ceiling, it could be time to reverse your position by placing a sell order.

Should I Invest in Oil?

If you are still not sure whether you should invest in oil – below we discuss some core factors you might want to consider before proceeding.

The Global Economy is Reopening

When COVID-19 was announced as a pandemic by the WHO, the global markets capitulated. It goes without saying that one of the worst-hit sectors from the pandemic was oil and gas. After all, with countries around the world shutting down their borders – both domestic and international travel came to a halt. As such, the demand for oil hit record lows.

In turn, the global spot price of oil fell to $19 per barrel in April 2020 – which was unprecedented. However, as the world begins to reopen, this has had a major impact on the value of oil. At the time of writing in November 2021, oil is now trading at over $83 per barrel – which is a significant increase from its 2020 lows.

Earn Dividends From an Oil Investment

if you don’t like the sound of trading oil CFDs and instead prefer traditional stocks – this offers a number of core benefits. At the forefront of this is being able to grow your investment via capital gains and dividends. Regarding the latter, oil companies are known to pay some of the most competitive dividend yields in the financial markets.

bp stocks dividends

For example, the likes of Exxon Mobil are still averaging a dividend yield of 5-7% – which outpaces the industry average. Similarly, BP is also paying a healthy yield in the 5% region.

Look for Average Exploration and Production Costs

When oil companies explore and produce oil, this invariably comes at a cost. However, the specific costs involved will vary from company to company. With this in mind, a great strategy to undertake when considering how to invest in oil in the UK is to make a shortlist of average cost prices.

This will be denominated as a price per barrel and in most cases – the information is released in the firm’s quarterly report. To give you an idea of what to expect, leading oil company ConocoPhillips has an average cost price of $40 per barrel as of late 2021. This offers huge room for movement, even when oil prices are low.

The Cost of Investing in Oil in the UK?

When you invest in oil in the UK, certain costs will need to be taken into account. These costs will be determined by the commodity broker that you decide to use.

Here’s an overview of what to expect:

Deposits and FX Fees

The first cost that you might incur when you invest in oil is the deposit fee implemented by your chosen broker. This can also vary depending on your preferred payment method.

  • Additionally, it is important to remember that like most commodities, the benchmark currency for oil is US dollars.
  • As you will be depositing funds in British pounds, be sure to check what FX fees apply.
  • At eToro, you will pay a 0.5% FX fee when you deposit funds in the UK.
  • This will see your deposit converted to US dollars at the time of the transaction.
  • As such, once you have funded your account, you can trade oil without needing to worry about fluctuating exchange rates.

Other brokers, however, will charge you an FX fee every time you enter and exit an oil position.

Oil Investment Commissions

You also need to check what commissions will apply when you invest in oil. Once again, this will depend on your chosen broker, as well as the specific oil market that you wish to access. For example, if you want to invest in oil stocks, then share dealing fees need to be taken into account. At eToro, you can invest in oil shares at 0% commission – irrespective of which stock exchange the firm is listed on.

How to Invest in Oil UK – Conclusion

This guide has explained every you need to know when investing in oil in the UK for the very first time. We have covered the many oil-related instruments that you can trade – such as CFDs, stocks, and ETFs – as well as the best brokers for the job.

If you’re looking to invest in oil in the UK right now – eToro offers dozens of suitable instruments at low fees. In fact, you can invest in oil stocks and ETFs at 0% commissions and trade CFDs on a spread-only basis.

Plus, eToro is regulated by the FCA and you only need to meet a $50 minimum deposit to get started!

1
$50Exclusive promotion
Our score10
  • Invest in a wide range of cryptocurrencies
  • Ability to copy more experienced investors and their decisions
  • eToro crypto wallet included which makes it beginner-friendly
0% Commissionstart TradingOur score 10

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About Kane Pepi PRO INVESTOR

Kane Pepi writes for several high profile publications such as InsideBitcoins, the Motely Fool, and Learnbonds. Based in Malta, Kane is extremely skilled at complex subjects related to financial matters - including a Bachelor’s Degree in Finance, a Master’s Degree in Financial Crime, and actively engaged in Doctorate Degree research, for the money laundering threats of the blockchain economy.