Understanding Energy Trading

Energy trading involves products like crude oil, electricity, natural gas and wind power. Since these commodities often fluctuate abruptly, they can be attractive to speculators. Energy trading involves trading the different energy commodities like oil, natural gas, heating oil, gasoline, or even electricity. Energy commodities tend to be quite volatile, making large price swings. They also tend to trend quite well. Both of these characteristics make energy trading the choice for traders who are looking for large profit potential. When adding in the leverage possible with CFDs on energy commodities, these are an ideal choice for the aggressive trader.

Energy trading began in 1978 with the first oil futures contract on the New York Mercantile Exchange (NYMEX). During the 1980s and 1990s, the International Petroleum Exchange (IPE) and NYMEX successfully launched futures contracts for oil and gas. These successful futures exchanges survived the Enron et al. energy-trading debacles of recent years and demonstrated their capable financial performance. Today, oil companies and financial houses provide the necessary trading liquidity through market-making on both the established government-regulated futures exchanges and off-exchange energy derivatives markets, which can clear on the futures exchanges. These companies know how to manage their financial energy risks and have the risk-management skills that will be deployed increasingly in the emerging global environmental markets.