All About Oil Futures and When to Invest

You may have heard that oil is a non-renewable resource, and you already know how much the global economy depends on it. So, based on these facts alone, you may think that the price of oil will always be on the rise. When you buy oil futures, you’re betting money that you know how the price of oil will change in the future. But taking this bet can be riskier than it may seem. In this article, we’ll go over the pros and cons of buying oil futures.

You may want to consider working with a financial advisor to determine whether this is a good option for your portfolio.

How Oil Futures Work

When you invest in oil futures, you’re not actually investing in the oil itself. This means you don’t have to store barrels of crude oil in your garage. Instead, you’re investing in a futures contract and betting on the price of oil. When you buy oil futures, you’re taking a position on the movement of oil prices. This could be a long position (you’re betting that oil prices will rise) or a short position (you’re betting that oil prices will fall).

Let’s say you decide to take a long position on oil prices. You buy a stake in an oil futures contract on the New York Mercantile Exchange (NYMEX) through a broker, paying a certain price per barrel of crude oil for 1,000 barrels. Later, you learn that the price per barrel has risen, so you decide to exit your position by selling your side of the futures contract.

You just made a profit on your investment in that example, once you subtract your initial investment and the fees you paid. But if oil prices had dropped, you would have lost money.

It’s also possible to buy futures on margin, meaning that you only have to put up a fraction of what your stake is worth. This means you stand to make bigger gains, but it can also lead to bigger losses. It’s a good idea to approach this strategy with caution as it’s different from investing in a safer vehicle, like bonds.

How to Buy Oil Futures

You hear on the news when oil prices rise and fall, but to succeed as an investor in oil prices, it’s not enough to react to that news. Rather, you have to find a way to anticipate those changes.

You may read that prices have risen and decide to take a long position, assuming that that trend will continue. But if there’s one thing to remember about investing, it’s that past performance is not a guarantee of future returns. In other words, you can’t know for sure that oil prices will continue to rise. In fact, oil prices are quite volatile. That means you stand to lose the money you invest.

If you still want to try your hand at trading oil futures, you’ll need to go through a brokerage firm, and not all firms give the option of investing in commodity futures. When you find a brokerage firm online that lets you trade futures, it’s important to check its credentials against SEC and FINRA records.

From there, confirm what your liability will be if you trade on margin, and start small. Oil futures are not the place to put your retirement savings or the down payment you plan to make on a home one day.

Oil Futures vs. Other Oil Investments in 2026

Political events can swing oil prices sharply, and that dynamic affects different ways of investing in oil differently. Futures contracts directly reflect expectations about oil prices in the future, so they tend to react quickly to news about supply risks, sanctions and export access. In contrast, stocks and funds respond more gradually because they incorporate company fundamentals and broader market conditions.

For example, the capture of Venezuelan President Nicolás Maduro and the resulting U.S. involvement in Venezuela’s oil sector in early 2026 shifted market expectations about future crude flows and sanctions policy. In the immediate aftermath, traders priced in a geopolitical risk premium even though Venezuela’s actual production had not changed significantly, in part because the country’s oil infrastructure had been damaged and output was low relative to global supply.

Oil futures can reflect this kind of uncertainty quickly because they are essentially bets on future prices. If traders believe that future Venezuelan exports might increase over the next year as political conditions evolve, futures prices may trend lower in anticipation of higher supply. But if instead traders expect prolonged disruption, futures prices can rise in response to expected shortfalls. Futures contracts are sensitive to short-term risk and policy news, making them more volatile than other instruments.

By contrast, oil stocks and ETFs incorporate company earnings, balance sheets and long-term strategy in addition to commodity prices. A major U.S. oil company that might benefit from changing Venezuelan policy does not immediately reflect political headlines in its stock price the same way a futures contract does. Company valuations may move more slowly and also respond to investment risk, dividend policies and operational performance.

Further, oil ETFs and mutual funds provide exposure to the sector without the direct price swings of futures. They spread risk across many companies or across futures expiries, which can smooth out reactions to political developments like those in Venezuela. For many investors, this makes them a middle ground between direct futures speculation and single-name stock risk.

It’s also worth noting that futures trading involves leverage and rollover risk. Because futures contracts expire, investors must roll positions forward, which can add cost or benefit depending on the shape of the forward curve. This complexity means futures are generally suited to experienced traders who monitor political and supply developments closely, rather than long-term investors.

Bottom Line

The average investor doesn’t need to dabble in oil futures, or any kind of commodity futures trading, for that matter. Instead, they will likely be better off looking for less risky, low-fee investing options that you can “set and forget.” But if you are ready for the challenge and potential downsides that come with investing in oil futures, it is important that you first become deeply familiar with both the investment itself and the broader industry and geopolitical environment.

Tips for Investing

Before investing in anything remotely risky you may want to first run your plan by a professional. Financial advisors can help you create an investment plan and help you understand what investments will lead you toward your long-term financial goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted 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.
You may want to also run any potential investments through an investment and return calculator to help you understand your potential with the asset.