What are Energy Futures? A Beginner’s Guide

Energy futures are some of the most actively traded and closely watched contracts in the futures markets. Whether you’re trading crude oil, natural gas, or gasoline, these contracts offer the ability to speculate on price direction or hedge against market risk, all without physically owning the commodity.

This beginner’s guide will walk you through everything you need to know, including:

• What energy futures are and how they work

• The most popular energy futures contracts

• Why traders and businesses use them

• The difference between standard and micro energy futures

• Key risks and benefits

• How to start trading energy futures

What Are Energy Futures?

Energy futures are standardized contracts that let you buy or sell a specific energy commodity like crude oil, natural gas, or gasoline at a predetermined price on a future date. You’re not trading the actual barrels of oil or gallons of gas. Instead, you’re speculating on the price of that commodity.

These contracts are traded on major exchanges like the CME and offer nearly 24-hour access, five days a week.

In simple terms:
Energy futures allow you to trade the price movements of essential fuels used in everything from global transportation to home heating without needing to take physical delivery.

How Energy Futures Work

Let’s say crude oil is trading at $80 per barrel. You think prices will rise, so you buy one WTI Crude Oil futures contract.

• If oil rises to $85 before the contract expires, you profit.

• If it falls to $75, you lose money.

Each energy contract has a fixed size, an expiration date, and trades in tick increments that determine how much each price move is worth.

Here’s how it breaks down:

• Underlying asset: The physical energy commodity (e.g., crude oil, natural gas)

• Contract size: Fixed number of barrels, MMBtu, or gallons

• Tick size: Smallest allowable price move

• Tick value: Dollar amount of each tick movement

• Expiration: Monthly or quarterly

• Settlement: Financially settled (no physical delivery at MetroTrade)

• Margin: Only a percentage of the full contract value is required to open a position

Key takeaway:
Energy futures give you exposure to global commodity markets with lower capital requirements and no need for physical storage or handling.

Why Trade Energy Futures?

1. Speculation on Price Moves

Futures give you the ability to go long (buy) if you expect prices to rise, or go short (sell) if you believe they’ll fall. That means you can potentially profit in both bullish and bearish markets.

2. Hedging Against Price Volatility

Companies that rely on fuel or energy like airlines, trucking firms, or utilities use futures to lock in prices and reduce uncertainty. Energy producers also hedge to guarantee future revenue.

3. Leverage

Futures let you control a large position with a relatively small amount of capital, amplifying both gains and losses. For example, a standard WTI crude oil contract is worth $80,000 when oil is at $80 per barrel, but you might only need around $1,000 in margin to open the position.

4. 24-Hour Market Access

Crude oil and natural gas futures trade almost 24 hours a day, 5 days a week. You can react to geopolitical developments, supply shocks, and economic reports as they happen, even outside normal stock market hours.

5. Diversification

Energy prices often move independently from stock markets. Adding energy exposure to your trading strategy can reduce correlation and expand your opportunity set.

Most Popular Energy Futures Contracts

Here’s a breakdown of the most actively traded energy contracts, including both standard and micro-sized futures available on MetroTrade.

Note: These contracts trade nearly 24 hours a day, five days a week. Margin requirements are approximate and can vary based on market conditions and broker policies.

Crude Oil Futures

WTI Crude Oil Futures (/CL)

• Size: 1,000 barrels

• Tick size: $0.01 per barrel

• Tick value: $10.00

• Example contract value: $80,000 (if oil is $80/barrel)

• Expiration: Monthly

• Trading hours: Nearly 24/5
  WTI crude oil is a global benchmark for U.S. energy prices. These contracts are highly liquid and widely used for speculation and hedging alike.

Micro WTI Crude Oil Futures (/MCL)

• Size: 100 barrels

• Tick size: $0.01 per barrel

• Tick value: $1.00

• Example contract value: $8,000
  /MCL contracts offer all the same exposure but at 1/10th the size. They’re ideal for smaller accounts and tighter risk control.

Natural Gas Futures

Natural Gas Futures (/NG)

• Size: 10,000 MMBtu (million British thermal units)

• Tick size: $0.001 per MMBtu

• Tick value: $10.00

• Example contract value: $30,000 (if gas is $3/MMBtu)
  Natural gas is a major source of heating, electricity, and industrial energy. These contracts are influenced by weather, seasonal demand, and global supply dynamics.

Micro Natural Gas Futures (/MNG)

• Size: 1,000 MMBtu

• Tick size: $0.001 per MMBtu

• Tick value: $1.00
  At 1/10th the size of the standard contract, /MNG is better suited for newer traders or those looking to scale in and out of positions gradually.

Gasoline Futures

Gasoline Futures (/RB)

• Size: 42,000 gallons (equivalent to 1,000 barrels)

• Tick size: $0.0001 per gallon

• Tick value: $4.20

• Example contract value: $105,000 (if gas is $2.50/gallon)
  Gasoline futures reflect the wholesale price of refined fuel used in cars. They tend to be more volatile and are often used by refiners and distributors to manage risk.

Standard vs. Micro Energy Futures

Micro energy futures make it easier for retail traders to manage risk, test strategies, or gain commodity exposure without committing too much capital. Most micro contracts are available on MetroTrade.

How Traders Use Energy Futures

Speculators

Active traders use energy futures to profit from price direction. This could be based on:

• Economic releases (like inventory reports from the EIA)

• Supply disruptions (e.g., geopolitical conflict, natural disasters)

• Seasonal demand (like winter heating needs or summer driving)

• Technical indicators and price action

You can trade short-term momentum or long-term macro trends, all with leveraged exposure and low transaction costs.

Hedgers

Hedging is common among businesses that rely on or produce energy. Examples include:

• Airlines: Buy crude oil futures to lock in jet fuel prices

• Utilities: Use natural gas futures to control fuel costs for power plants

• Refiners: Hedge both input (oil) and output (gasoline) prices

• Energy producers: Sell futures to guarantee a floor price on future sales

These strategies help stabilize costs and reduce exposure to energy market volatility.

Key Benefits of Energy Futures

Liquidity: Contracts like /CL and /NG have some of the deepest order books in futures. That means faster execution and tighter spreads.

Built-in leverage: Control tens of thousands of dollars in value with only a fraction of the capital — but manage your position size carefully.

Transparency: Energy futures prices are determined by open-market trading on regulated exchanges, not opaque pricing models.

Real-time exposure: Stay plugged into global energy trends and news events with round-the-clock market access.

Diversification: Energy markets often move independently from equities or bonds, giving you alternative trade setups.

Risks of Energy Futures

Leverage magnifies losses: Just as gains can be amplified, so can losses. A 1% move against you in crude oil can result in hundreds of dollars lost per contract.

Volatility: Energy prices can spike or collapse due to unexpected events like war, weather, economic shifts, or supply disruptions.

Complex pricing factors: Crude oil isn’t just about supply and demand. Traders also need to monitor inventory levels, OPEC decisions, refining capacity, and transportation logistics.

Contract expiration: Futures contracts have fixed expiration dates. You’ll need to roll your position or close it before expiry to avoid unwanted delivery risk (although MetroTrade is cash-settled only).

Emotional trading pressure: Fast-moving markets and big swings can lead to poor decisions if you don’t stick to a clear plan.

How to Start Trading Energy Futures

1. Open a futures-enabled account with MetroTrade
   There are no account minimums, and you can get started in minutes.

2. Choose your market
   Begin with Micro Crude Oil or Micro Natural Gas if you’re starting small.

3. Understand the specs
   Know the tick size, tick value, and margin requirements for each contract.

4. Use the demo platform
   Practice with real-time prices using simulated funds before you trade live.

5. Manage your risk
   Use stop-loss orders, size your positions appropriately, and never trade with money you can’t afford to lose.

Final Thoughts

Energy futures offer a powerful way to trade global commodity markets, hedge exposure, and diversify your strategy beyond stocks and bonds. Whether you’re speculating on short-term moves in crude oil or looking to hedge a business tied to natural gas prices, these contracts provide direct access to one of the world’s most essential and volatile asset classes.

Start small, learn the mechanics, and trade with discipline. With the right tools and education, energy futures can become a key part of your trading approach.

Ready to trade energy futures?
Explore Contracts on MetroTrade

Or test your strategy risk-free with our Demo Trading Account

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