Five ways to play the plunge in oil prices

THE collapse of the oil price has created losers and winners, and like every major movement in a commodity sector, the trick for investors is figuring out which side of the trade to be on. The most obvious victim of the slide in Brent and West Texas Intermediate prices over the last six months has been the major oil producers.

Holders of these equities have seen price slides of up to 33 per cent. The question for oil company investors now is how to determine which of these companies are prepared to weather a sustained period of oil prices at around US$50 a barrel, or worse. Inevitably, those companies with high debt levels combined with high operating costs will be the first to get washed away. In contrast, low-leveraged companies with attractive cost structures are likely to survive. These companies will gain when the oil price comes back, and are the ones that investors should be eyeing right now.

But stock-picking isn't the only way to make money out of the butchered oil price. Here are five ways to position yourself for either a recovery or a further deterioration of the oil market, depending on where you place your bet.