We may live in the oil age, yet surprisingly few people directly invest in this remarkable commodity.
Oil fuels and feeds the world. It gives us petrol, plastics, petrochemicals, solvents, asphalt, paint, fertiliser and feedstock, and household goods such as shampoo, perfume, cosmetics and deodorant.
A horse would have to work for one full year to produce the energy in a single barrel of oil. A young, fit human would have to labour for 10 years.
There’s a reason they call it black gold. But is it a good investment?
Oil can be shockingly volatile. In July 2008, for example, the price of a barrel of Brent crude soared to US$146, arguably triggering that autumn’s global stock market crash, but by December that year it had sunk to just $40.
The oil price has been relatively stable in the past few years, but now it is on the move again.
“Since 2011 the oil price has fluctuated between $90 and $130, and volatility has been low,” says Aksel Kibar, a CMT technical strategist at Invest AD in Abu Dhabi.
That could soon change. “Oil price volatility is cyclical, it can’t remain low for long. Periods of low volatility are typically followed by high volatility, and vice versa,” Mr Kibar says
The oil price peaked at $116 in June, largely because of political turmoil in the major oil producers Iraq and Russia, but the possibility of fresh supply from Libya and the US shale oil boom has eased the pressure.
Traders who anticipated that oil prices would rise on today’s political turmoils been proved wrong, says Chris Beauchamp, a market analyst at the global trading service IG. “Weeks have gone by and oil supplies have been relatively unaffected.”
On the morning of August 8, West Texas Intermediate futures for September delivery were trading at $98.12 a barrel and Brent crude for September was at $106.53 a barrel.
Traders have learnt to take bad news in stride, and this suggests the oil price could fall further, Mr Beauchamp says.
Other analysts disagree. Oil is just too important for the price to fall much lower, says Steen Jakobsen, the chief economist at the global investment bank Saxo Bank, which has offices in Abu Dhabi. “Everything you did this morning involved energy consumption. Checking your smartphone, putting on the coffee, pouring cold milk from the fridge, taking a shower, driving to work and walking into your air-conditioned office.”
Oil is primarily extracted from volatile or underdeveloped regions, creating a real risk of disruption of supply. If current geopolitical threats in the Middle East and Russia continue, it is a safe bet that energy prices will rise, Mr Jakobsen says.
Most serious investors should have some exposure to commodities in their portfolios, says Matthew Michael, a product manager on the commodities team at the asset managers Schroders.
But you should brace yourself for a bumpy ride. “Oil prices may have risen over the past 15 years, but the journey has not been smooth. If you had invested in Brent crude oil futures in 2007, for example, you would have enjoyed a 49 per cent return that year. In 2008, you would have suffered a 53 per cent loss. In 2009, you would have made 29 per cent.”
Schroders has a “positive outlook” for energy, including crude oil. “Climate change, supply shocks and rising demand from emerging countries should drive commodity prices higher. The question all investors should ask is how can they protect their purchasing power in this challenging environment. Oil is part of the answer.”
Mr Michael says you should also balance this with other commodities, such as gas, precious metals and agriculture, to offset the inevitable oil price volatility.
So how do you invest in black gold?
Exchange traded funds.
If you are feeling brave, you could invest directly in oil futures, says Mr Kibar at Invest AD. “But you should only do this if you are an experienced, disciplined investor, because the possibility of losing your capital is high.”
For most people, an ETF is a better way to invest in oil. These are low-cost index-tracking funds that follow the fortunes of a host of markets, indexes and commodities, and can be traded quickly and cheaply like individual company stocks.
You can use ETFs to invest directly in the oil price, Mr Kibar says. “Oil ETFs don’t actually physically buy oil and gas, that’s prohibitively expensive. Instead, they gain exposure to price movements by investing in near-term futures contracts.”
This can make them more volatile, so more cautious investors may prefer to buy an ETF that invests in the stocks of oil companies and the wider oil-services sector.
These have the added advantage of generating dividend income on top of growth.
Jason Webster from Fleming Family & Partners, the manager of the VAM commodities fund, recommends two ETFs investing in oil company stocks. “The SPDR S&P Oil & Gas Exploration & Production ETF gives you exposure to smaller, more dynamic companies that are likely to be more reactive to changes in the oil price. Volatility is likely to be higher, but you should expect commensurate returns.”
For more stable returns, Mr Webster recommends the SPDR Energy Select Sector ETF, which is dominated by oil majors such as Exxon Mobil and Chevron.
The other mainstream option is to invest directly in individual company stocks. Mr Webster says smaller oil companies such as Anardarko Petroleum, Apache and Hess offer potentially richer pickings than the global oil majors such as Exxon Mobil. “These tend to be more dynamic and a successful project can have a material impact on the share price. Just make sure you understand the risks.”
Investors should also consider the oil-services sector, the companies who provide equipment for drilling and production along with support services to the majors, Mr Webster says.
“The big energy companies spend about $500 billion a year on exploration and development, so investing in the companies receiving this cash can make sense. You could choose a dominant player like Halliburton, which has a strong hold in the US fracking market, or a niche player such as Hi-Crush Partners, which supplies the sand needed to keep cracks in shale apart once they been fracked.”
Platform support vessels , which support offshore oil rigs, are also attractive as offshore exploration expands, Mr Webster says. “Nordic American Offshore, for example, offers a modern and growing fleet and yields around 9 per cent.”
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The specs
Engine: 0.8-litre four cylinder
Power: 70bhp
Torque: 66Nm
Transmission: four-speed manual
Price: $1,075 new in 1967, now valued at $40,000
On sale: Models from 1966 to 1970
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
Test
Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
THE SPECS
Engine: 1.5-litre
Transmission: 6-speed automatic
Power: 110 horsepower
Torque: 147Nm
Price: From Dh59,700
On sale: now
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The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Dubai Bling season three
Cast: Loujain Adada, Zeina Khoury, Farhana Bodi, Ebraheem Al Samadi, Mona Kattan, and couples Safa & Fahad Siddiqui and DJ Bliss & Danya Mohammed
Rating: 1/5
Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
Five famous companies founded by teens
There are numerous success stories of teen businesses that were created in college dorm rooms and other modest circumstances. Below are some of the most recognisable names in the industry:
- Facebook: Mark Zuckerberg and his friends started Facebook when he was a 19-year-old Harvard undergraduate.
- Dell: When Michael Dell was an undergraduate student at Texas University in 1984, he started upgrading computers for profit. He starting working full-time on his business when he was 19. Eventually, his company became the Dell Computer Corporation and then Dell Inc.
- Subway: Fred DeLuca opened the first Subway restaurant when he was 17. In 1965, Mr DeLuca needed extra money for college, so he decided to open his own business. Peter Buck, a family friend, lent him $1,000 and together, they opened Pete’s Super Submarines. A few years later, the company was rebranded and called Subway.
- Mashable: In 2005, Pete Cashmore created Mashable in Scotland when he was a teenager. The site was then a technology blog. Over the next few decades, Mr Cashmore has turned Mashable into a global media company.
- Oculus VR: Palmer Luckey founded Oculus VR in June 2012, when he was 19. In August that year, Oculus launched its Kickstarter campaign and raised more than $1 million in three days. Facebook bought Oculus for $2 billion two years later.
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How much sugar is in chocolate Easter eggs?
- The 169g Crunchie egg has 15.9g of sugar per 25g serving, working out at around 107g of sugar per egg
- The 190g Maltesers Teasers egg contains 58g of sugar per 100g for the egg and 19.6g of sugar in each of the two Teasers bars that come with it
- The 188g Smarties egg has 113g of sugar per egg and 22.8g in the tube of Smarties it contains
- The Milky Bar white chocolate Egg Hunt Pack contains eight eggs at 7.7g of sugar per egg
- The Cadbury Creme Egg contains 26g of sugar per 40g egg
ILT20%20UAE%20stars
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Where to donate in the UAE
The Emirates Charity Portal
You can donate to several registered charities through a “donation catalogue”. The use of the donation is quite specific, such as buying a fan for a poor family in Niger for Dh130.
The General Authority of Islamic Affairs & Endowments
The site has an e-donation service accepting debit card, credit card or e-Dirham, an electronic payment tool developed by the Ministry of Finance and First Abu Dhabi Bank.
Al Noor Special Needs Centre
You can donate online or order Smiles n’ Stuff products handcrafted by Al Noor students. The centre publishes a wish list of extras needed, starting at Dh500.
Beit Al Khair Society
Beit Al Khair Society has the motto “From – and to – the UAE,” with donations going towards the neediest in the country. Its website has a list of physical donation sites, but people can also contribute money by SMS, bank transfer and through the hotline 800-22554.
Dar Al Ber Society
Dar Al Ber Society, which has charity projects in 39 countries, accept cash payments, money transfers or SMS donations. Its donation hotline is 800-79.
Dubai Cares
Dubai Cares provides several options for individuals and companies to donate, including online, through banks, at retail outlets, via phone and by purchasing Dubai Cares branded merchandise. It is currently running a campaign called Bookings 2030, which allows people to help change the future of six underprivileged children and young people.
Emirates Airline Foundation
Those who travel on Emirates have undoubtedly seen the little donation envelopes in the seat pockets. But the foundation also accepts donations online and in the form of Skywards Miles. Donated miles are used to sponsor travel for doctors, surgeons, engineers and other professionals volunteering on humanitarian missions around the world.
Emirates Red Crescent
On the Emirates Red Crescent website you can choose between 35 different purposes for your donation, such as providing food for fasters, supporting debtors and contributing to a refugee women fund. It also has a list of bank accounts for each donation type.
Gulf for Good
Gulf for Good raises funds for partner charity projects through challenges, like climbing Kilimanjaro and cycling through Thailand. This year’s projects are in partnership with Street Child Nepal, Larchfield Kids, the Foundation for African Empowerment and SOS Children's Villages. Since 2001, the organisation has raised more than $3.5 million (Dh12.8m) in support of over 50 children’s charities.
Noor Dubai Foundation
Sheikh Mohammed bin Rashid Al Maktoum launched the Noor Dubai Foundation a decade ago with the aim of eliminating all forms of preventable blindness globally. You can donate Dh50 to support mobile eye camps by texting the word “Noor” to 4565 (Etisalat) or 4849 (du).
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
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%3Cp%3E%3Cstrong%3EEngine%3A%3C%2Fstrong%3E%203.0-litre%20six-cylinder%20turbo%20(BMW%20B58)%3Cbr%3E%3Cstrong%3EPower%3A%3C%2Fstrong%3E%20340hp%20at%206%2C500rpm%3Cbr%3E%3Cstrong%3ETorque%3A%3C%2Fstrong%3E%20500Nm%20from%201%2C600-4%2C500rpm%3Cbr%3E%3Cstrong%3ETransmission%3A%3C%2Fstrong%3E%20ZF%208-speed%20auto%3Cbr%3E%3Cstrong%3E0-100kph%3A%3C%2Fstrong%3E%204.2sec%3Cbr%3E%3Cstrong%3ETop%20speed%3A%3C%2Fstrong%3E%20267kph%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EOn%20sale%3A%3C%2Fstrong%3E%20Now%3Cbr%3E%3Cstrong%3EPrice%3A%3C%2Fstrong%3E%20From%20Dh462%2C189%3Cbr%3E%3Cstrong%3EWarranty%3A%3C%2Fstrong%3E%2030-month%2F48%2C000k%3C%2Fp%3E%0A
RESULTS
5pm: Maiden (PA) Dh80,000 1,400m, Winner SS Lamea, Saif Al Balushi (jockey), Ibrahim Al Hadhrami (trainer).
5.30pm: Wathba Stallions Cup Handicap (PA) Dh70,000 1,400m, Winner AF Makerah, Sean Kirrane, Ernst Oertel
6pm: Handicap (PA) Dh80,000 1,600m, Winner Maaly Al Reef, Brett Doyle, Abdallah Al Hammadi
6.30pm: Handicap (PA) Dh90,000 1,600m, Winner AF Momtaz, Antonio Fresu, Musabah Al Muhairi
7pm: Handicap (PA) Dh80,000 2,200m, Winner Morjanah Al Reef, Brett Doyle, Abdallah Al Hammadi
7.30pm: Handicap (TB) Dh100,000 2,200m, Winner Mudarrab, Jim Crowley, Erwan Charpy
'The Lost Daughter'
Director: Maggie Gyllenhaal
Starring: Olivia Colman, Jessie Buckley, Dakota Johnson
Rating: 4/5
