As we move through the summer, energy markets continue to be influenced by a range of factors, with geopolitical developments, supply dynamics and seasonal demand patterns all playing a role in shaping prices.
In this update, we'll look at what's been driving energy prices over the last few weeks, what we're watching across the global energy market, and what it could mean for businesses as we move through the rest of the summer and beyond.
Watch the full video below or scroll down for the key takeaways.
Over the past few weeks, energy markets have remained highly volatile, largely driven by disruption in the Middle East and ongoing concerns over global LNG supplies.
At the height of the conflict, gas and electricity prices for next winter rose sharply as markets reacted to the potential loss of supply. Since then, prices have moderated, with gas prices falling by around a third and electricity prices reducing by approximately 16% as ceasefire negotiations have progressed.
Whilst the market continues to view the disruption as temporary rather than a long-term structural issue, prices remain highly sensitive to developments in the region.
The key takeaway is that markets can move quickly in response to global events, underscoring the importance of a clear procurement strategy rather than reacting to short-term market movements.
The situation in the Middle East remains one of the biggest influences on energy markets.
Although negotiations continue, uncertainty remains around how quickly a longer-term agreement can be reached. Shipping through the Strait of Hormuz has started to recover, but congestion and damage to some LNG infrastructure in Qatar mean supplies are not expected to return to normal until later this summer.
The market will continue watching developments closely, as any escalation or delays to supply recovery could quickly influence prices.
Until the situation fully stabilises, geopolitical events are likely to remain a major driver of short-term market volatility, even where immediate supply concerns appear limited.
The impact of recent disruption continues to be felt across the global LNG market.
Hot weather across both Europe and Asia has increased demand for gas used in cooling, creating stronger competition for available LNG supplies.
Around 80% of Qatar's LNG exports are typically supplied to Asia, and stronger prices in the region have already encouraged some cargoes to move away from Europe. However, Europe's highly liquid gas market continues to attract flexible LNG supplies, helping to limit more significant price increases.
If Asian demand remains elevated throughout the summer, further cargo diversions are possible.
This highlights just how interconnected the global energy market has become. Demand trends in Asia can have a direct impact on UK and European energy prices, making global developments every bit as important as domestic supply fundamentals.
Weather continues to play an increasingly important role in energy markets.
Following a record-breaking warm spring, Europe has already experienced periods of extreme heat, and forecasts suggest above-average temperatures are likely to continue through much of the summer.
Higher temperatures increase electricity demand for cooling, particularly across Asia, which can strengthen competition for LNG supplies. Closer to home, warmer river temperatures have also reduced French nuclear generation, placing additional pressure on European power markets.
Meteorologists have also confirmed that an El Niño weather pattern is developing. Whilst its impact on the UK is less direct, it can influence global weather patterns later this year and into winter, making it an important factor to monitor.
Taken together, these weather conditions add another layer of uncertainty to the market and could continue to influence both energy demand and wholesale prices over the coming months.
As we move further into the summer refill season, European gas storage remains a key focus for the market.
Storage levels are currently around 46% full, approximately 18% below the five-year average for this time of year. However, analysts still expect storage to reach around 87% by November if LNG imports continue to improve over the coming months.
The bigger concern is what happens after winter. In a colder weather scenario, storage levels could fall significantly lower than normal before next summer, although expectations of increasing global LNG supply are helping to keep longer-term prices relatively well supported.
While the overall outlook remains positive, below-average storage levels mean the market has less of a buffer should further supply disruption occur or if winter temperatures prove colder than expected.
Carbon markets have also seen significant movement over recent months.
UK carbon prices have increased by around 32%, largely driven by expectations that the UK and EU Emissions Trading Schemes will become more closely aligned. European carbon prices have also strengthened, although to a lesser extent.
Markets are now awaiting further details on planned reforms to the EU Emissions Trading Scheme, expected later this month, which are intended to support industrial decarbonisation while maintaining market stability.
Although carbon markets often receive less attention than gas or electricity, they continue to influence wholesale power prices and remain an important factor shaping the wider energy landscape.
With so many moving parts – from geopolitics and weather to LNG supply, storage levels and carbon markets – uncertainty is likely to remain a feature of the energy market for some time.
Whilst prices have eased from the highs seen during the recent conflict, markets remain highly sensitive to new developments, and sentiment can change quickly.
Rather than trying to react to every headline, businesses are generally better served by having a procurement strategy aligned to their own objectives, budgets and appetite for risk.
For organisations with upcoming contract renewals, remaining engaged with the market and maintaining flexibility can help create opportunities when conditions become more favourable.
Ultimately, the right approach will depend on the level of certainty your business requires and how much market risk you're comfortable managing.
If you'd like to understand what current market conditions could mean for your organisation, whether that's contract renewals, procurement decisions or your wider energy strategy, our team is always happy to help.
We'll continue to monitor the market closely and share updates as the situation develops.
You can also visit the Insights section of our website for the latest market commentary, analysis and practical guidance.