How to Buy Oil Stocks

Oil, a non-renewable resource, is essential to numerous parts of life, from fueling transportation to fertilizing crops. As a result, stocks in companies that discover and handle oil can be profitable investments for knowledgeable investors. Here’s how to purchase oil stocks, and what to know about them before you do.

You might consider working with a financial advisor, who can advise you about specific types of assets, like oil, and how investing in them could impact your finances.

Oil Stocks Explained

One way to invest in oil is by buying stocks related to the oil industry. This typically provides exposure to companies that profit from extracting and refining petroleum. Besides fueling cars, petroleum is crucial for producing numerous goods, such as:

Oil for heating residential and commercial buildings
Plastics (from natural gas)
Asphalt
Jet fuel
Wax
Lotions and cosmetics

Oil stocks correlate with global supply and demand for petroleum. Over the last few decades, oil prices have spiked and dipped due to international circumstances and energy needs. For instance, before the current Ukrainian conflict, the COVID-19 pandemic caused energy usage to plummet in 2020, drastically reducing oil prices.

In addition, the global push to research renewable energy sources has the potential to drive down demand for oil in the future. However, current oil usage indicates that the world will likely rely on petroleum for years to come.

Because oil stocks’ profitability mirrors the demand for oil, they are not risk-free investments. The price of a barrel of crude oil varies like a company’s stock prices.

How to Buy Oil Stocks

Investing in oil stocks doesn’t mean purchasing oil or oil-rich land. Instead, just as you might buy stock in a company that sells technology or toothpaste, you can buy stock in companies that handle oil in some way, such as drilling or transporting petroleum. You can do this through any typical stock broker or brokerage account that you already have open.

Since purchasing stocks involves investing in specific companies, it pays to do your homework before making a financial commitment. Then, when you feel ready to invest in an oil company, you can use a brokerage account to buy and sell oil stocks.

Tips for Investing in Oil Stocks

Investing in oil stocks requires basic knowledge of the oil industry and market dynamics. These tips can help in ensuring you get the most out of your investments:

1. Monitor Oil Prices

Generally, the more expensive a barrel of crude oil is, the better oil stocks perform. Because oil prices affect oil stocks, jumping in at a specific price point can mean the difference between gaining or losing on your investment. The cheaper you can buy into oil stocks, the more money you’ll make when you sell for a higher price.

2. Understand Your Investment Options

Numerous options are available for investing in oil. Because extracting and using production is a complex process, a host of companies are involved at every level of oil production:

Exploration and production (E&P) companies, also known as upstream companies, assess areas for oil potential. They drill for oil in new places on land and in the ocean. Typically, share prices of these companies correlate heavily with oil and natural gas prices.
Midstream companies profit by transporting, processing and storing natural gas and petroleum products. These companies generate income through contracts, making their stock prices steadier. Three of the largest publicly traded oil and gas pipeline companies are Enbridge, Enterprise Products Partners and TC Energy.
Downstream operations refine oil and sell it—think gas stations and the refineries that supply them. They have direct contact with consumers. Downstream companies also produce widely used goods, such as fertilizer. Petrochemical companies use natural gas to produce a vast array and volume of plastics.
Integrated companies combine E&P, midstream and downstream operations. These are usually massive multinational corporations, like ExxonMobil.
Oilfield services companies sell equipment and operational services to E&P companies. Drilling companies, for example, purchase rigs, bits and other machinery from oilfield services companies. Besides drilling companies, there are numerous publicly traded oilfield services companies, such as Schlumberger, Baker Hughes and Halliburton.

3. Prioritize Dividends

Stock price increases aren’t the only way investors can profit from the oil industry. The gradual decrease in demand for oil is causing many companies to return more cash to shareholders instead of reinvesting money in more wells or refiners. As a result, dividend payments from financially stable companies can be an excellent alternative to capital gains.

4. Be Mindful of Potential Risk

The last few decades have been a roller coaster for oil prices. The boom and bust of the free market have caused volatility in oil stocks, meaning the next price fluctuation could have significant implications for your investments. So, researching your investments and setting goals such as selling at a specific stock price or establishing dividend income are crucial to success.

Alternative Ways to Invest in Oil

Stocks are just the tip of the iceberg when investing in oil. You can also put your money into the following assets:

Oil Mutual Funds

Oil mutual funds operate just as mutual funds do in other industries, allowing you to invest in a collection of stocks simultaneously. Investing in oil mutual funds allows you to diversify your investments by spreading money amongst upstream, downstream and integrated oil companies.

Oil Options, Futures and Spot Market

Another option are oil options and oil futures, which are contracts that set a specific price for an oil transaction in the future. The price defined in the contract is permanent, meaning that if prices increase in the months or weeks ahead, the contract rises in value because it enables a buyer to acquire cheap oil. However, if oil prices drop, the contract becomes almost worthless because its permanent price is more expensive. As a result, oil futures require deep investment knowledge and are high-risk investments.

The oil spot market, meanwhile, isn’t accessible to the average investor because of the money and space required. The spot market involves purchasing and selling thousands of barrels of oil, making it more of an option for wealthier investors.

Commodity ETFs, ETNs and MLPs

Oil exchange-traded funds (ETFs) and exchange-traded notes (ETNs) correlate with oil futures but don’t purchase the contracts. As such, they give investors access to this volatile section of the oil industry without the additional risk of acquiring the contracts themselves. One of the primary differences between the ETFs and ETNs is that you don’t have to pay taxes on ETNs until you sell them, while you pay taxes on gains from ETFs each year you hold them.

Master limited partnerships (MLPs) focus on the exploration, development, mining, processing or transportation of minerals or natural resources. MLPs often hold assets like oil or gas pipelines to generate cash flow. Because they are pass-through entities, they aren’t subject to income tax. Instead, the income tax liability is passed through to the unitholders or investors. MLP distributions are similar to the dividends from a dividend-paying stock or mutual fund.

Energy Stocks and Equity ETFs

An energy ETF invests in an array of energy companies. These funds diversify your investment dollars, spreading risk across companies. For example, your investment might involve:

An oil index
Direct investments in ExxonMobil
An ETF tied to an E&P company, like SPDR S&P Oil & Gas Exploration and Production ETF (market handle XOP)

Should I Invest in Oil?

As with any investment, oil brings its own particular advantages and disadvantages. Because oil is a crucial resource for vehicle fuel, heat and various products, demand isn’t likely to decrease in the near future.

However, unforeseen and uncontrollable events, such as the COVID-19 pandemic and international conflict, can swing oil prices in both directions. As a result, oil is a volatile investment that requires industry knowledge and risk tolerance. While an oil ETF might be less risky than purchasing stock in an oil company, it’s not likely to be a fruitful investment unless you understand the dynamics of the oil market.

How Political Events in Venezuela Are Affecting Oil Prices in 2026

Global oil markets in 2026 are being shaped not just by supply and demand fundamentals, but also by geopolitical developments, particularly in Venezuela. The country holds some of the world’s largest proven crude oil reserves, but decades of underinvestment, sanctions and operational decline have kept actual production low relative to its potential. Even with massive reserves, Venezuela has historically contributed only a small share of global supply because its infrastructure has deteriorated and sanction‐related restrictions have limited exports.

Recent political changes, most notably the capture of Venezuelan President Nicolás Maduro by U.S. forces, have introduced further uncertainty into oil markets. Oil prices have responded more to the risk of supply disruptions and policy shifts than to immediate changes in output. In the short term, markets have shown choppy price behavior as traders assess how policy enforcement and sanctions adjustments could influence Venezuelan exports relative to current global oversupply conditions.

Under new conditions, U.S. policy toward Venezuelan crude has shifted. Reports indicate that some Venezuelan oil shipments may be directed toward U.S. refiners under modified sanction terms, with tens of millions of barrels discussed for sale to U.S. markets. This redirection of heavy crude can influence pricing spreads and regional supply patterns, particularly between West Texas Intermediate and international benchmarks such as Brent.

The longer term implications remain uncertain because any meaningful increase in Venezuelan production depends on rebuilding infrastructure and attracting sustained investment, which can take years. Analysts suggest that even with eased sanctions, production gains are likely to be gradual rather than immediate. As a result, Venezuela’s role in global oil pricing in 2026 continues to reflect political risk and policy direction, rather than large volume shifts in crude supply.

For investors considering oil stocks, this dynamic underscores the difference between geopolitical risk pricing and fundamental supply/demand pricing. Geopolitical events can cause short-term volatility or changing risk premiums in oil markets, even when actual physical supply changes are modest. Understanding how political developments influence both price expectations and company outlooks can help frame investment decisions in 2026.

Bottom Line

An investor on a computer with an oil rig in the background.

Oil stocks allow you to invest in companies involved in every facet of the oil industry. Whether you’re interested in a specific portion of the market, such as drilling, or want to diversify your portfolio with an oil ETF, you can purchase these assets through a brokerage account. However, doing your homework is vital to profit from your investments. The oil market is infamous for rising and plunging unexpectedly, so an uninformed investment will likely lose money.

Tips for Oil Stocks

Oil investments are complex, and you can get exposure to the market through numerous asset types. Fortunately, you don’t have to research your options on your own. Financial advisors have the expertise and resources necessary to find the ideal investments for your portfolio. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Oil futures are a particularly complicated, risky investment. However, these contracts can be fruitful for involved investors not satisfied with “set it and forget it” type investments. For more, here’s the guide to oil futures.