What is energy trading?
The energy market includes both the physical market (where actual barrels of oil or megawatt-hours of electricity are delivered) and the financial market (where derivatives based on energy prices are traded for profit or hedging). For most retail traders and investors, the financial market is the primary access route, since physically owning crude oil or electricity is impractical. The commodities market provides context for how energy commodities fit alongside metals and agricultural products in the broader commodity investment landscape.
Types of energy commodity
Crude oil
Crude oil is the world's most traded commodity. The two primary international benchmarks are Brent crude (priced from North Sea production, the global standard for international oil) and WTI (West Texas Intermediate, the US benchmark). Oil prices are primarily driven by OPEC+ production decisions, US shale output, global economic demand (particularly from China) and geopolitical risk including Middle East conflict. UK traders can access oil trading through spread bets and CFDs on both Brent and WTI markets.
Natural gas
Natural gas is traded globally as both a pipeline commodity and as LNG (liquefied natural gas) shipped by tanker. In the UK, gas trades against the National Balancing Point (NBP), the virtual hub behind all domestic and commercial gas contracts. European gas prices are set at the Title Transfer Facility (TTF) in the Netherlands. Gas prices are highly sensitive to weather, storage levels, LNG export demand, geopolitical supply disruptions and renewable intermittency.
Electricity
Electricity in the UK is traded on the NordPool power exchange and through bilateral OTC contracts. Unlike oil and gas, electricity cannot practically be stored at scale, making it one of the most volatile commodity prices in the world. Prices can spike dramatically within a single day when wind generation drops unexpectedly or when extreme cold drives demand surges. In April 2026, the UK government announced measures to break the link between gas and electricity prices in the wholesale market, which currently means gas-fired generation sets the marginal price even when cheaper renewables are available. Source: Institute for Government (June 2026).
Renewable energy
The renewable energy trading market covers physical electricity from wind and solar, but also financial instruments including Renewable Energy Certificates (RECs), Guarantees of Origin (GOs) and carbon credits under the UK Emissions Trading Scheme (UK ETS). Companies trade carbon credits to offset emissions; electricity generators sell certificates to prove their output came from renewable sources. This market has grown significantly as corporate net-zero commitments have increased demand for verified renewable power.
Carbon
The UK Emissions Trading Scheme (UK ETS) requires energy-intensive industries to hold allowances for each tonne of carbon they emit. These allowances trade in a secondary market: companies that emit less than their allocation can sell surplus allowances; those exceeding their limit must buy additional ones. Carbon prices in the UK ETS fluctuate based on policy decisions, the economic cycle (lower output means less emissions means lower demand for allowances) and Brexit-related divergence from the EU ETS.
How to trade energy markets
Method | How it works | Best suited to |
Spread bets on oil/gas | Stake per point of price movement; profits free from CGT; no ownership of the commodity | Short-term UK traders speculating on oil/gas price direction |
CFDs on energy commodities | Leveraged contracts on crude oil, natural gas, electricity prices | Active traders; international investors |
Energy company shares | Buy shares in BP, Shell, Exxon, BP, Schlumberger etc | Investors wanting equity exposure to energy sector earnings |
Energy ETFs |
What drives energy prices?
OPEC+ supply decisions: the OPEC+ grouping (OPEC countries plus Russia and others) controls a significant share of global oil and gas supply. Production quota changes are the primary near-term driver of crude oil prices.
Geopolitical risk: Middle East conflict, sanctions on major producers and supply route disruptions create significant price spikes. The 2026 Middle East conflict created an energy crisis that drove wholesale electricity prices sharply higher in the UK, leading to the April 2026 government intervention.
Demand from China and emerging markets: China is the world's largest importer of crude oil and a major LNG buyer. Chinese economic data, particularly industrial production and PMI readings, is closely watched as a leading indicator of energy demand.
Inventory levels: the US Energy Information Administration (EIA) publishes weekly crude oil inventory data every Wednesday at 3:30pm UK time. Unexpected inventory draws (lower than expected stocks) support prices; unexpected builds weigh on them.
Weather: extreme cold or heat drives electricity and gas demand spikes. The combination of a cold winter and low wind output creates the conditions for the most severe power price volatility.
Renewable intermittency: as wind and solar grow as a share of UK electricity supply, short-term price volatility has increased. When the wind stops blowing, gas-fired backup generation must compensate, pushing gas demand and electricity prices higher.
Dollar strength: most energy commodities are priced in US dollars globally. A stronger dollar makes energy more expensive for buyers using other currencies, potentially reducing demand. For UK traders,
Energy stocks to watch
For investors seeking equity exposure to energy markets rather than direct commodity price exposure, the following represent the most widely watched names:
Shell (LSE: SHEL): UK-listed global oil major
BP (LSE: BP.): UK-listed integrated oil and gas company with renewable energy division; significant shareholder distributions
Drax Group (LSE: DRX): UK-listed biomass and renewable power generator; direct exposure to UK electricity market and carbon pricing
ITM Power (AIM: ITM): UK-listed green hydrogen electrolyser manufacturer; exposure to the hydrogen energy transition theme
ExxonMobil (NYSE: XOM): US-listed oil supermajor; accessible through our US share dealing with no dealing commission
NextEra Energy (NYSE: NEE): world's largest renewable energy company by capacity; exposure to wind, solar and energy transition infrastructure
Energy trading FAQs
What is energy trading?
Energy trading is the buying and selling of energy commodities including crude oil, natural gas, electricity and carbon credits. It encompasses both physical delivery of energy and financial speculation on price movements through derivatives. For most retail participants, access is via spread bets and CFDs on oil and gas prices, or through shares in energy companies.
How do I trade crude oil in the UK?
UK retail traders can access crude oil through spread bets and CFDs on Brent crude or WTI. Both products allow long and short positions with leverage. Spread bet profits are generally free from UK CGT. Oil is also accessible through energy company shares (Shell, BP) or oil-focused ETFs through a share dealing account or ISA.
What drives oil and gas prices?
The primary drivers are OPEC+ production decisions, US shale output, global economic demand (particularly Chinese industrial activity), geopolitical risk (Middle East conflict, sanctions), inventory data (weekly EIA report) and weather. Dollar strength also affects USD-denominated commodity prices for non-US buyers.
