Energy: Prices off to a strong start – ING

The oil market is off to a strong start in 2025 with ICE Brent trading above $76/bbl. This is despite the oil balance for 2025 looking comfortable. The strength in the market appears to be on the back of a stronger physical market in the Middle East. This is well reflected in the Brent/Dubai spread which has traded into negative territory recently, ING’s commodity experts Warren Patterson and Ewa Manthey note.

Natural gas prices in Europe may go up

“There are suggestions that Asian buyers have been looking to other Middle Eastern grades amid broader sanctions against Russia and Iran. There will also be concerns over how hawkish Trump will be towards Iran when he takes office later this month. Stricter enforcement of sanctions against Iran would leave the market tighter than expected. However, it would also leave an opportunity for OPEC+ to increase supply.”

“The natural gas market has also strengthened. TTF broke above EUR50/MWh last week, although finished the week just below this level. This is after confirmation that Russian pipeline flows via Ukraine were halted with the expiration of Gazprom’s transit deal with Ukraine. This means that Europe will lose around 15bcm of annual gas supply. However, this shouldn’t come as too much of a surprise. It has been well-telegraphed for over a year that Ukraine had no intention of extending the deal.”

“Adding further support to European gas is the forecast for colder-than-usual weather over the next two weeks, which could see storage falling at a quicker-than-expected pace. At the moment, storage is a little more than 70% full, well below the 85% seen at the same stage last year and also below the five-year average of around 76%. Storage levels should still mean that Europe gets through this winter comfortably, however, the refilling of storage through the injection season will be a bigger job than last year, which should provide some support to summer prices.”