Energy trading is the process of buying and selling assets related to energy, such as energy stocks, energy ETFs, and energy commodities. These assets can include companies involved in oil, gas, and renewable energy sources. But with so many options to choose from, it can be challenging to know where to invest or trade. In this article, we'll explore some of the most popular energy stocks in 2024, explain how energy trading works, and discuss what influences the prices of energy assets.
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What is energy trading and how does it work?
Energy trading involves buying and selling energy-related assets, like oil, natural gas, electricity, and renewable energy sources. This trading can include actual physical commodities or financial products linked to them, such as energy stocks and ETFs (Exchange-Traded Funds).
The process works by traders and investors looking to profit from changes in energy prices. They buy when they believe prices will rise and sell when they expect prices to fall. This trading can happen on exchanges or through reputable online brokers such as Skilling. It helps balance supply and demand, ensuring energy gets to where it's needed. Essentially, energy trading is a way to invest in the future of energy markets, whether you're interested in fossil fuels or renewable energy.
Examples of popular energy stocks in 2024 by market cap
1. ExxonMobil (XOM.US)
Current market cap as of July 25, 2024: $453.41 billion
One-year performance: 8.83%
ExxonMobil is one of the world's largest publicly traded energy companies, involved in oil and gas exploration, production, refining, and distribution. Founded in 1870, it has a long history in the energy sector and is a major player in the global oil market. The company's diverse operations span across the entire energy value chain, from crude oil extraction to retailing fuel at gas stations.
2. NextEra Energy Inc (NEE.US)
Current market cap as of July 25, 2024: $154.93 billion
One-year performance: -0.04%
NextEra Energy is a leading clean energy company and one of the largest electric utility companies in the U.S. Founded in 1925, NextEra Energy is known for its focus on renewable energy, particularly wind and solar power. The company's operations include electricity generation, transmission, and distribution, with a significant portion of its business dedicated to renewable energy projects.
3. Schlumberger (SLB.US)
Current market cap as of July 25, 2024: $68.2 billion
One-year performance: 17.02%
Schlumberger is a leading global oilfield services company that provides technology, information, and integrated project management solutions to the oil and gas industry. Founded in 1926, Schlumberger offers a wide range of services, including drilling, reservoir characterization, and production management. The company plays a crucial role in helping oil and gas producers optimize their operations.
4. BP Plc (ADR) (BP.US)
Current market cap as of July 25, 2024: $93.22 billion
One-year performance: -6.80%
BP, formerly known as British Petroleum, is a major global energy company involved in oil and gas exploration, production, refining, and marketing. Founded in 1909, BP has a significant presence in both traditional and renewable energy sectors. The company is actively working on transitioning to cleaner energy sources, including investments in renewable energy and reducing carbon emissions.
How does energy trading work?
Energy can be traded in different ways, including through Exchange-Traded Funds (ETFs) and Contracts for Difference (CFDs). At Skilling, a multi-award-winning CFD broker, you can trade CFDs on popular energy stocks. Here's below you can learn more about online trading energy stocks CDFs with Skilling:
- Open an account: Start by opening an account with Skilling. This process is straightforward and involves providing some basic information.
- Choose your assets: Decide which energy stocks you want to trade. Skilling offers a range of options, allowing you to trade on the price movements of various energy-related assets.
- Analyze the market: Use Skilling’s trading platform tools to analyze the market. Look at charts, news, and other data to make informed trading decisions.
- Place a trade: Once you’ve decided, you can place a buy or sell order. With CFDs, you can profit from both rising and falling prices.
- Monitor your trade: Keep an eye on your trades and manage your positions. You can set stop-loss and take-profit levels to help manage risk.
- Close your trade: When you’re ready, close your trade to lock in your profits or losses.
However, trading CFDs comes with risks, including the potential for losing more than your initial investment. Prices could move quickly and unpredictably, leading to significant gains or losses. It's crucial to understand these risks and consider using risk management tools like stop-loss orders to help protect your capital.
What affects the price of energy assets?
The price of energy assets is influenced by several factors:
- First, supply and demand play a major role; if there’s more energy produced than needed, prices may drop.
- Second, geopolitical events, like conflicts in oil-producing countries, can cause prices to rise.
- Third, economic conditions, such as inflation or a recession, affect energy prices. Weather also matters; extreme conditions can impact energy production and supply.
- Finally, government policies and regulations, including environmental laws and taxes, could influence energy prices.
Keeping track of these factors could help traders understand and anticipate price changes in energy markets.
Advantages and disadvantages of energy trading
| Advantages | Disadvantages |
|---|---|
| Allows investment in various assets such as stocks, ETFs, and commodities. | Energy markets could experience large price swings. |
| Successful trades could yield substantial profits. | Understanding factors influencing prices can be challenging. |
| Many energy markets offer high liquidity, making it easier to buy and sell assets. | Factors like geopolitical events and weather can create unpredictable risks. |
| Energy assets can act as a hedge against inflation. | Using leverage could amplify both gains and losses. |
| Access to global markets and diverse energy sectors. | Government policies and political instability could affect market stability. |
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Summary
When you decide to get into energy trading, it's important to thoroughly research the market and understand the assets you're trading. This is crucial since energy markets can be highly volatile and influenced by a range of factors such as geopolitical events, supply and demand shifts, and economic conditions. Being informed helps you make better decisions and manage risks effectively.
Source: investing.com
