Energy CFDs are financial derivatives that allow you to speculate on the price movements of energy commodities such as brent or wti crude oil and natural gas without owning the real-physical product.
This enables investors to trade on both rising and falling markets.
To start trading Energy CFDs on zForex, follow these steps:
Strong economic growth typically leads to higher energy demand, driving prices up.
Example: In the early 2000s, China experienced rapid economic growth, with GDP growth rates often exceeding 10% annually. This economic boom led to a substantial increase in energy demand as industries expanded and infrastructure projects proliferated. The surge in demand contributed to a significant rise in oil prices, with Brent Crude reaching record highs by mid-2008.
Cold winters and hot summers can drive up demand for heating and cooling, respectively, leading to price increases, especially for natural gas.
Example: During the winter of 2013-2014, the United States experienced a polar vortex, leading to extremely cold temperatures across much of the country. This harsh winter significantly increased the demand for natural gas used in heating homes and businesses. As a result, natural gas prices spiked, with the Henry Hub spot price peaking at over $8 per million British thermal units (MMBtu) in February 2014, compared to around $4 per MMBtu earlier in the season.
Political instability in oil-producing regions, sanctions, or conflicts can lead to supply disruptions and price spikes.
Example: In 2011, the Arab Spring uprisings affected several oil-producing countries in the Middle East and North Africa, including Libya, Egypt, and Syria. The political instability and conflicts disrupted oil production and exports from these regions. Consequently, the global oil supply was impacted, leading to a sharp increase in oil prices. Brent Crude prices surged from around $90 per barrel in early 2011 to over $125 per barrel by April 2011.
Energy prices are highly sensitive to geopolitical events. For example, tensions in oil-producing regions like the Middle East can cause price spikes in crude oil. This makes energy commodities ideal for news trading.
Energy commodities often have different market drivers compared to other asset classes. For instance, if you have a long position in an airline stock, which may suffer from rising oil prices due to higher operational costs, you can hedge this position by shorting WTI crude oil. This way, gains from the short position can offset losses in the airline stock during periods of rising oil prices.
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