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Oil and gas investing begins with the investor determining what oil and gas stocks he should invest his hard earned cash into. While some will focus on higher return on investment opportunities like oil sands stocks and Canadian oil stocks, we feel that you should begin by reviewing the following key three factors:

Financial In Market 1) Is the Oil Stock Over valued?

the world' exporting countries, particularly OPEC, the Organization of the Petroleum Exporting Countries. The amount of crude oil that these countries produce determines the price per barrel of oil. The next factor that effects gas prices is the cost of refining the crude oil. This makes up about 10% of the total price of gas. The third factor is the cost of transporting the crude oil to a refinery, then the refined gas to a distribution point

Oriental Trading This is probably the first question you should ask yourself as a lot of oil stocks are more hype than actual value. A good indicator of an oil stocks value is the oil stocks price earnings ratio. If the price earnings ratio is greater than 20, we would suggest you further investigate why the oil stocks price earnings ratio is so high. If it is due to an aggressive growth strategy including a recent land acquisition or a large drilling program that is to take place in the future, attempt to determine the impact these events will have on the oil stocks earnings. In a lot of cases the future event's impact on the oil stock will not be what the investment community forsees.

In the United Kingdom, nearly a third of its power generation depends on natural gas. In 15 years, the UK will be dependent on Russia for 90 percent of its imported gas. Japan is almost totally dependent on imported energy sources and is heavily invested in Iran's Azadegan oil field. China has major investments in Iran, importing 13.6 percent of its oil requirements from that nation and, overall, 45 percent of its oil imports from the Middle East. China is also investing in Canadian tar sands projects.

Financial Forex Forex Software 2) Trust Unit versus Common Share

There are five primary factors that effect the price you pay for gas at the pump. Prices generally increase when the world crude oil market lowers their inventories. Also, when demand exceeds refinery capacity gas prices increase. The first factor that makes up the price of gas at your local station is crude oil suppliers. This makes up about 59% of the price you pay for gas and it is determined by

Trading There are a significant amount of oil stocks which have converted to become trust units. The main purpose of these oil stocks becoming trust units is to save and defer tax to unitholders. However, the distributions that these oil stocks (trust units) pay out require a significant amount of cash flow and therefore reduce the growth capability of the specific oil stock. Therefore if you are looking for an oil stock which will provide you with steady cash flow than an oil stock which is a trust unit is your choice. Whereas if you would like to hold an oil stock in your portfolio which has a high growth potential you should stay away from oil stocks which are trust units. This is because normal public company shares usually do not pay out large dividends to shareholders as they prefer to reinvest their hard earned cash in their capital program. Oil and gas capital programs include purchasing land, mineral rights, drilling programs etc., all of which are more likely to generate shareholder value rather than just paying these funds out to unitholders.

Meanwhile, without noticing, oil prices reached above $60 a barrel due to a cold weather in the US. 2006 as it was a key inflationary factor.

Trading Financial System 3) Natural Gas versus Oil

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Day Trading Investors should be aware what percent of their oil and gas stocks interest is in natural gas versus oil. This is important as if you buy a natural gas focused oil and gas company and the price of natural gas is at an all time high then this is probably not the time to buy. However this is probably a good time to consider selling depending on what commodity experts feel the price of natural gas will do in the years/months to come. The same goes for oil stocks, although it is our feeling that the price of oil is much less volatile as it is doubtful the price of oil will be reduced by 50%. Whereas the price of natural gas can easily be reduced by 50% in a given year. If you are planning on holding your oil and gas investment for an extended period of time then do not fret too much about the commodity prices as they should increase with inflation over an extended period of time. If you are buying and selling oil and gas stocks for short periods of time, then commodity prices become extremely important as you can make a significant return in a short period of time.

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By considering the above three factors you will be on your way to earning black gold. All oil and gas investors should also monitor insider trades of oil and gas public companies. www.findst.com is a invaluable resource for oil and gas investors as it helps oil and gas investors monitor their oil and gas stocks.

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Science Of Financial Market Carmen is an Insider Trading Analyst for Findst, an Oil and Gas Portal focusing on oil and gas stocks and oil and gas jobs specifically oilfield jobs and oil rig jobs.

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