Oil prices are set to rise after oil nations agreed to cut production this week, presenting an opportunity for investors to profit.

After more than two years of rock-bottom prices, Opec, the oil cartel, decided to reduce global production for the first time in eight years.

The cut, of around 700,000 barrels a day, will give a boost to energy companies and those in the supply chain, but potentially the entire FTSE 100 index of leading British companies could benefit.

“In some ways the higher the oil price goes the better it is for the FTSE 100,” said Russ Mould, of AJ Bell, the fund shop.

“Investors have plenty of choice. The more risk that is taken the greater the potential reward if oil keeps rising but equally the potential downside would be greater should the rally fizzle out.”

The most direct, and risky, way to profit from rising oil prices is holding shares in an individual oil company, such as giants BP and Shell. Share prices will rise if oil prices do bounce back and any rise would also help the companies to maintain their dividends, currently at between 7pc and 8pc, Mr Mould said.



Source link