It’s been tumultuous times following the meeting between Trump and Zelensky last Friday. As expected, the European and UK energy markets opened the week higher, however those gains have quickly reversed. Some reports have stated the fall to have initially started on headlines the White House was seeking plans for possible sanctions relief to Russia. Not only this, but reports have stated the escalating Tariff war between the US and China would see an increase of LNG coming to Europe. The drop in the market may have been pre-emptive given China hasn’t taken a US cargo since December. Could this possibly be traders unwinding positions on headline news once again? Last week’s Commitment of Traders report certainly shows another drop.
Looking closer at the fundamentals whilst weather in the near term is looking warm, next week temperatures and wind forecasts are expected to drop below seasonal norm. There is also an increasing threat of a sudden stratospheric warming (SSW). Combine this with LNG pricing favouring Asia through summer, and a storage situation that hasn’t changed, markets appear to be caught between geopolitics, investment fund positions and fundamentals. Today the European Commission proposed a two-year extension of the EU’s targets to fill gas storage. The 90% target by 1. November looks set to stay in place.
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