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How to invest in energy commodities for beginners in 2024

Use this guide to learn about energy commodity investing and follow a step-by-step guide on how to invest in energy online.

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Updated: Aug 1, 2024

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This page explains how to invest in energy commodities online in 2024. Learn about the different energy investing methods, what moves energy prices, and why the energy industry might be a good addition to your portfolio.

What are energy commodities?

Energy commodities are fuels that we use to power our daily lives. From crude oil that becomes the petrol and diesel to drive our daily commute, to the uranium that fires nuclear power stations, they play a crucial role in the world today.

Oil is by far the most widely traded commodity but there are many others that you can invest in as well. Natural gas is a growing sector, while renewable energy makes up an ever larger piece of the overall pie.

Why invest in the energy industry?

Energy commodities offer a way to take advantage of the world around us. Their performance is often very different to the stock market, as prices are affected by different factors and often have a much more global reach.

Here are some of the reasons energy investing is popular and why you might want to get involved.

Energy commodities offer protection against inflation. Periods of high inflation usually coincide with rising energy prices. Investing in oil and gas offers a way to take advantage of that environment when the value of money in your pocket is failing.
It’s a way to diversify your investment portfolio. Having different asset classes in your portfolio is generally considered a good idea. By creating balance, you create a margin of safety, where you’re less exposed to failure in one area of the economy.
You can use energy commodities to hedge your other positions. As energy commodity prices act differently from stocks, bonds, and currencies, they can be used to hedge those positions. If your stock investments would suffer from rising inflation, then investing in some commodities as well reduces the overall damage.
There’s always demand for energy products. Our society is so reliant on power and transportation that there is a constant demand for fuel. It’s also hard to create new supply at speed, so prices have a relatively high floor.
To speculate on future price changes. Many people use the energy markets simply as a means to speculate. Oil trading in particular is popular, where traders can use futures contracts to predict how prices might rise or fall in the future.

How to invest in energy online – a step-by-step guide

Investing in energy is a simple process. Before you begin, you’ll need to register with a trusted online broker to access the energy market. Follow the steps below to learn how to invest in energy.

Step 1. Open an energy investment account

Choose an online broker that offers a way to invest in the energy market. We recommend eToro as the best energy investing platform. You can invest in a range of energy stocks, energy ETFs, and energy mutual funds.

Step 2. Choose your energy investment vehicle

You can invest in energy using various methods. Most investors prefer to invest in renewable energy stocks, ETFs, or funds. You can also directly invest in energy through futures contracts. Our guide below explains more about each option.

Step 3. Make your investment in energy

Once you decide how to invest your money into energy, it’s time to make your investment. To do this, simply log into your online brokerage account and use the search bar to find your chosen investment. For example, if you’re planning to invest in a energy ETF, just type its name or ticker symbol and you’ll be taken to its trading page.

Fill out your order details on the trading page and hit the buy button. You’ll usually be able to decide how many shares you want to buy if using an exchange traded fund, stocks, or energy mutual funds. Alternatively, you can enter a dollar amount and the brokerage platform will take care of the rest.

Step 4. Monitor your investments

Regularly review your investment portfolio and its performance. Keep an eye on energy prices, oil prices, and other related prices to stay updated with the latest changes. If its price drops, you could use it as an opportunity to add to your investment. If it rises, you may want to consider taking some profit.

Where can I start investing in energy?

To invest in energy, you need to register with an energy investing platform. These are the best commodity trading platforms, ranked by our team of commodity experts according to their value for money, user experience, and security features.

We found 5 commodity trading platforms for users based in

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How can I invest in energy commodities?

There are several options available, ranging from investing in energy stocks to buying renewable energy ETFs. The right approach depends on your personal budget, risk tolerance, and timeline for seeing returns. Here’s a look at the various ways you can invest in energy commodities online.

Buy stocks in energy companies

The first option is to invest in companies that have exposure to the energy industry. These could be businesses involved in mining, extraction, or transport. Many stocks in the sector belong to oil and natural gas companies, although there is a growing number of top renewable energy stocks available today.

There are lots of factors that affect the price of energy sector stocks. So while investing in the best energy stocks is a way to get some exposure to the industry, there may not be a perfect correlation between energy prices and the fortunes of a stock price. The best solar stocks are one easy way to invest in renewable energy companies.

Here are some of the top energy stocks to buy now:

NOV Inc. (NYSE:NOV)
Cheniere Energy Inc. (NYSEAMERICAN:LNG)

Invest in energy ETFs

ETFs, or exchange-traded funds, are investment vehicles that track the performance of a particular asset, industry, or index. You buy shares in an energy ETF to gain exposure to the energy sector.

Some ETFs track the price of a specific commodity, such as green hydrogen or other renewable sources. Others own a batch of related energy commodities or track an index of energy stocks such as alternative energy companies allowing you to invest in the sector as a whole.

ETFs generally have a low cost of entry, so you can invest with a small amount of money, while you can invest through a regular trading platform, so they’re accessible to everyone.

Here are some popular energy ETFs that invest in the energy sector:

iShares MSCI World Energy Sector (AMS:WENS)
Lyxor MSCI World Energy (LON:NRGW)

Invest in energy funds or trusts

Funds and trusts are actively managed investments, where a fund manager pools together money from lots of different people and decides what to invest in. Each fund has a defined goal, such as to outperform a particular energy index over a period of time.

This type of investment normally requires each person to put up a substantial minimum deposit in order to join. There may also be a limited number of places available, so you can only buy shares in the fund when someone else wants to sell their spot.

Here are some of the best energy funds to invest in:

BlackRock Sustainable Energy Fund (MRNLU LX)
The Renewables Infrastructure Group (LSE: TRIG)

Trade energy futures contracts

Futures contracts are the most common way for the experts to trade energy commodities. With futures, you can speculate on energy commodity price changes, and predict whether you think they’re going to rise or fall.

You need plenty of experience and industry knowledge to understand the futures market and trade it successfully. Some energy markets can be highly illiquid and have large spreads, particularly during periods of price volatility.

Here are some energy futures contracts you can trade, along with the exchange they’re traded on and their symbol.

Crude oil – NYMEX (CL)
Newcastle coal – ICE/EU (NCF)
Natural gas – NYMEX (NG)

What energy markets can I invest in?

Crude oil is the most popular energy market. It’s made up of two benchmarks: Brent Crude and West Texas Intermediate, and you can invest in either. However, the energy industry stretches far beyond oil and there are lots of commodities you can invest in. Here’s a brief look at a few of the best energy commodities to invest in 2024.

Coal is formed from the remains of compressed plants. Coal is a combustible black rock that takes millions of years to form and is used as a fuel for generating electricity, powering industries, and heating homes and businesses. It is a non-renewable energy source but one of the most important in the world and you can invest in coal using various instruments like the best coal stocks.
Ethanol is a fuel source made from corn and other agricultural products. Its primary use is to reduce emissions and improve fuel efficiency in gasoline. You can invest in ethanol if you want exposure to a renewable energy source. The demand for ethanol is also expected to grow as the world transitions to clean energy sources.
Gasoline is a fuel derived from crude oil used in automobiles and other vehicles. Gasoline is a fossil fuel and during production, greenhouse gas emissions are released. Some experts suggest gasoline demand will fall in the coming years as electric vehicles become more popular. However, you can still invest in gasoline as that transition may take decades to occur.
Heating oil is another fuel source derived from crude oil. As its name suggests, heating oil is used to heat homes and commercial buildings. Like gasoline, some experts anticipate that heating oil’s demand will decline as more efficient heating systems are developed. However, that may take some time so it’s still worth learning how to invest in heating oil.
Natural gas is primarily used to generate electricity, heat homes and businesses, and bake industrial products. Natural gas is a cleaner fuel when compared to coal and its production and use are expected to increase in the future. Learning how to invest in natural gas could be a prudent move to capitalise on the expected growth in clean energy.
Oil is the most popular energy commodity in the world. The price of crude oil is an important factor for various industries and economies. Oil is a fossil fuel that is used for various applications including generating electricity, heating homes, making gasoline, plastics, and other products. You can invest in oil using lots of methods including the best oil stocks and ETFs.
Uranium is an energy commodity used to generate nuclear power. Nuclear power is a clean and efficient energy source. However, uranium and nuclear are also controversial due to the risk of accidents and the storage of waste. You may want to invest in uranium as demand for the energy metal is expected to rise as the world looks for clear alternatives to fossil fuels. The best uranium stocks offer easy exposure.

Is investing in energy safe?

Energy markets can be dangerous to newcomers who don’t understand them properly. The forces that affect prices can have a sudden and dramatic impact, while positions that use leverage are at risk of liquidation if markets move against you.

Consider these risks before you start investing in energy and use them to influence how and when you invest.

Energy commodities are volatile. Energy prices can rise and fall very quickly and with little warning. You can lose money fast, particularly if you use leverage and the market moves against you. It’s important to use stop-loss orders and be careful with leverage to avoid big losses.
It’s hard to predict weather events or climate change. Energy commodities have to be moved around a lot and require vast transportation networks to operate. Disruption to those networks, or an issue at the production stage such as an extreme weather event or a fire, can have major repercussions.
Geopolitical events play a large role in energy prices. The Russia-Ukraine war is one example of how conflicts or border disputes can cause a huge shift in energy prices. Because it’s so important, energy is intensely political, and inherently uncertain.
Energy investing requires intimate knowledge of the markets. Energy markets are not the same as stock markets and require a different set of skills and knowledge. Beginners can get caught out if they don’t understand the rhythms of the markets and lose money right out of the gate.
Commodity markets are often cyclical. There are often natural (or man-made) cycles to production that means markets revert towards the mean over time. Energy production is also so political that sometimes governments intervene to reverse price trends.

How much does energy investing cost?

The costs associated with investing in energy commodities will vary depending on the investment method you choose, although it is relatively inexpensive.

When buying energy stocks, ETFs, mutual funds, futures, or CFDs, you may be charged a commission, typically between $5 – $10. You may also need to pay a bid-ask spread, approximately 5 – 10% of your total transaction value.

Additionally, you could have a management fee if investing in mutual funds which will vary depending on the fund provider’s fee schedule but is usually around 1% of your investment. Often, the cheapest way to invest in energy is by buying stocks using a commission-free trading platform.

Is energy worth investing in?

Yes, energy commodities are a way to add diversity to your portfolio. Commodities act quite differently from other asset classes, like stocks, currencies, or crypto. Investing in some of each type of asset means you can succeed in different economic environments.

However, to invest successfully you have to spend time building an understanding of what moves energy markets. You need to set expectations and to embrace uncertainty. Energy is uniquely sensitive to political instability and sudden changes can have a big impact on your bottom line.

It’s a good idea to sign up for a commodities platform that has a demo account. That way you can practice and gain experience using virtual money before diving into the real thing. All of our recommended brokers above offer demo accounts, so that’s a good place to start.

Bottom line

Investing in energy commodities is a good choice if you’re looking for long term value and growth. The energy industry is crucial to the global economy and the sector generally performs well over time. With a shift towards clean energy now taking place, the renewables industry looks set to experience exponential growth in the coming years.

One of the key features of investing in energy commodities is the various ways you can get involved. There is an investment vehicle for everyone, from energy commodity stocks and ETFs for long term speculators to spot energy markets, futures, and CFDs for short term traders. A trusted and regulated trading platform is a must if you want to navigate the energy industry successfully.

Invest in energy commodites

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Our editors fact-check all content to ensure compliance with our strict editorial policy. The information in this article is supported by the following reliable sources.

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James Knight

Editor of Education

James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.

Prash Raval

Financial Writer

Prash is a financial writer for Invezz covering FX, the stock market and investing. For over a decade he has traded spot FX full time while... read more.