So I've got my interactive brokers account open now. January 2019 light sweet crude on the NYMEX is trading with a bid of $60.64 and an ask of $60.69. To buy 1 contract, my commission would be $2.37. So the bid/ask + commissions is a meager $2.42 on a $60,670 contract. Mini futures are 1/2 that size I believe.
So there's your super efficient way to speculate in oil.
So what exactly are you buying if you buy that. You're buying 1000 barrels of oil to be delivered with the following specifications:
Delivery shall be made free-on-board ("F.O.B.") at any pipeline or storage facility in Cushing, Oklahoma with pipeline access to Enterprise, Cushing storage or Enbridge, Cushing storage. Delivery shall be made in accordance with all applicable Federal executive orders and all applicable Federal, State and local laws and regulations.
At buyer's option, delivery shall be made by any of the following methods: (1) by interfacility transfer ("pumpover") into a designated pipeline or storage facility with access to seller's incoming pipeline or storage facility; (2) by in-line (or in-system) transfer, or book-out of title to the buyer; or (3) if the seller agrees to such transfer and if the facility used by the seller allows for such transfer, without physical movement of product, by in-tank transfer of title to the buyer.
http://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_contractSpecs_futures.htmlIn the commodities world there are hedgers (those locking in their price for oil they need) and there are speculators (those wishing to profit from the change in price of the underlying commodity).
I will go out on a limb and say that you are not operating as a refiner of light sweet crude oil or an running a small airline and do not need to purchase oil to be delivered to you in Cushing, Oklahoma. You're not going to be sitting there in Oklahoma watching your black gold pour into your storage tank. Therefore you are a speculator.
The inherent problem in you doing this (versus purchasing companies in VTSAX or even an energy ETF) is that you are, by definition, making an investment that is solely based upon the short term swing in oil, when your thesis "oil is going to be needed tomorrow no matter what happens" has very little to do with what the price for delivery of 1000 barrels of crude oil to Cushing Oklahoma is 1 year from now (or 3 months or 2 years from now). Natural gas prices in certain geographies have been "needed no matter what happens" to warm people up. That hasn't prevented the price from going negative
1 or parabolic
2. The fact that people need it doesn't mean the futures aren't wildly volatile based on short term swings in supply / demand or that you have any kind of insight. Now oil is more global and less volatile, but is still prone big swings (as you know).
If you think "oil is going to be needed", then be comforted that 5.5% of VTSAX owns reserves and/or extracts oil. The return on exxon mobil* is not 100% dependent on the price of oil in the next year, but rather the price less the cost of extraction averaged over the next 10, 20, 30 ,50, 100 years, so your price risk isn't concentrated in so short a time period.
If you want a little more than 5.5%, fine, buy an energy ETF; you'd still be making an overweight with little real thesis, but at least your time horizon won't be so short.
If after reading all that, you want to speculate in oil futures, then there are extremely efficient ways to possibly incinerate your capital as illustrated by the low transaction costs of the futures market. Pure exposure to oil is available in 500 barrel increments (the mini CL futures). Less than pure is available via ETFs ant ETN's. Levered exposure is available via options on the futures (so you can buy the right to buy 1000 barrels a year from now). It's all there for you to gamble away.
If I was trying to do what you're doing I'd buy an option to buy 1000 barrels in Jan 2019 for $60.00. That would cost me ~$5 (the options market isn't open so I can't tell) or $5,000 per contract. That way, if you're right you've got levered exposure. If you're wrong, you know precisely what you'll lose. But I'd only do that with an extremely small portion of capital. So if oil's at $60 or below, you lose your $5K and go home crying and blame mrspendy for serving you too many drinks at the table and sending you to the craps table. And it's at $80, you make $15K ($20K less $5K premium) and pat yourself on the back.
1.
http://business.financialpost.com/commodities/canadian-natural-gas-prices-enter-negative-territory-amid-pipeline-outages2.
https://www.bloomberg.com/news/articles/2018-01-04/natural-gas-in-u-s-soars-to-world-s-priciest-as-snow-slams-east*this is highly simplified given XOM has large refining and chemicals operations, but you get my point.