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Energy Market Update – May

Prices dropped in April

Gas and electricity prices for the winter fell by 15% and 10% last month. This was mainly due to worries about the global economy after the US introduced new trade tariffs, especially on China. The idea that there might be a peace deal between the US, Russia, and Ukraine also helped push prices down, as it raised hopes that sanctions on Russian gas might be eased.

Warm weather and good gas supply helped too

Warmer temperatures meant people used less gas for heating. On top of that, there was a strong supply of LNG (liquefied natural gas), and European countries started refilling their gas storage earlier than usual. The EU also lowered its storage targets for the winter, meaning there’s less pressure to buy gas now.

Energy market is rising back to the high prices seen before April

As we moved into May, energy prices have gone back up.  This was caused by projected higher demands from:

  • Forecasts of colder weather
  • The US pulling back on some tariffs
  • And the EU’s plan to completely stop using Russian gas by 2027

What else has been driving the market?

  1. US Trade Tariffs – When the US first announced new import tariffs in April, energy prices dropped quickly. But things calmed down when they paused most of the tariffs for 90 days. Still, ongoing trade tensions between the US and China are making markets unpredictable.
  2. Ongoing Conflict – Talks between the US, Russia, and Ukraine continued, but there’s still no long-term peace deal. In fact, fighting has increased in some areas. Towards the end of April, the US started blaming Russia more openly, which might lead to new sanctions.
  3. Global Gas Supply – At the start of the year, Europe’s gas prices were higher than in Asia, which helped attract more LNG to the region. But recently, European prices dropped, so it’s now more profitable to send gas to Asia. This could mean prices in Europe might need to go up again to stay competitive and secure enough gas for the summer.

Looking Ahead

Over the next few months, energy prices will likely keep fluctuating. The main things to watch are:

  • What the US decides to do with tariffs after the 90-day pause
  • Whether the Russia–Ukraine conflict gets better or worse
  • And how much demand there is for gas from countries like China, Japan, and South Korea

If the US relaxes tariffs, it could boost global growth and energy use, pushing prices up. But if the full tariffs go ahead, it might hit markets hard and bring prices down again.

If the war in Ukraine ends, more Russian gas might enter global markets over time, which could lower prices. But if things get worse, further sanctions could reduce supply and drive prices up.

In summer, Asian countries usually buy more LNG to power air conditioning and fill their gas storage. This could create competition with the UK and Europe for LNG, which would likely push prices higher.