How to trade the energy crisis?

Wholesale gas prices have surged this year. This article looks at markets to trade amid the energy crisis. Smaller energy companies are collapsing, for the big players in the UK energy market this appears to be an opportunity. GBP/NOK has tumbled sharply as Norwegian gas imports surpass the UK's domestic production.

Downtrend 5

How to trade the energy crisis 

Wholesale gas prices have surged 250% this year and 70% since August owing to a combination of both supply and demand factors. 

Russian supply bottlenecks, a lack of wind in the North Sea, rising Asian demand, in addition to the closure of several platforms in the North Sea and low natural gas stores have all played a part. These factors have come as Europe heads towards winter, a period when demand typically spikes for heating in homes, industry and generating power and as economies are reopening post pandemic, raising demand further.  

High demand and low supply are sending natural gas prices spiking higher. 

The pick up in US natural gas hasn't been acute but the pattern is still clear.

Impact near term – big energy firms benefit 

The immediate impact of the price surge is on smaller energy firms. These are less likely to have hedged, which allows firms to manage costs over the long term. Instead, these firms buy at the spot rate meaning that they are incurring huge losses as they are likely unable to pass the increase on to their customers. 

The UK had around 70 energy suppliers in 2018. This had fallen to around 40. So far nine suppliers have gone bust this year and six have folded this month alone. More could well follow shortly.  

Larger firms could be offered state backed loans for taking on customers from smaller suppliers. This is good news for the big energy firms. By tidying up the mess of the small companies in the energy market these large energy firms can expect to re-establish a healthy profit from these same customers in years to come. Furthermore, competition is reduced, bad news for the customer good news for the big energy players. 

SSE one of the big players in the UK energy market has see its price rise as the smaller players collapse. 

Learn more about trading equities

Where next for SSE share price?


SSE has been trending higher since early March, it trades above its 50 & 100 sma and is approaching the key 1700p level, the all time high which was reached pre-pandemic in February 2020, and previous to that in 2015 and January 2008. The RSI suggests that there could be more upside to come, although 1700p could be a tough level to break. It would take a move below 1590p to negate the near term uptrend and a move below 1450p for the sellers to gain traction. 

Endesa plunges

Spain’s Endesa, the outcome has been opposite. The share price plunged on Monday after the government took measures to protect consumers by capping increases in gas prices and redirecting the company’s profits. 


Rising energy prices & GBP 

Should the rise in gas prices be sustained the current situation has the potential to evolve into a full-blown energy crisis which has implications for the British economy and the Pound.  

Higher natural gas imports could widen the UK’s trade deficit. According to Deutsche Bank, UK gas imports from Norway passed the UK own’s domestic production. The recent rise in the commodity price is likely to go some way to explaining GBP/NOK’s steep decline over the past month. 

Elevated energy prices mean higher bills which will push up inflation. As underlying costs rise not only households but also businesses, shops and manufacturers will see prices climb, threatening consumer confidence and the economic recovery. 

CPI is already at 3.2% its highest level in over a decade. The BoE sees inflation rising to 4% by the end of the year but cooling next year. Usually, higher inflation prompts the likelihood of the central bank raising intertest rates which would be Pound supportive. 

However, an energy crunch is a supply side constraint which has a negative impact on the Pound and is likely overshadow expectations of the rates market. Particularly given that rising energy prices could quickly dampen the economic recovery raising the risk of stagflation. 

Learn more about the Pound

How to trade with

Follow these easy steps to start trading with today:

  1. Open a account, or log-in if you’re already a customer.
  2. Search for the market you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels.
  4. Place the trade.

More from Equities

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account