Spotlight on energies in Q1
By Paul Reid
January has been a month for trend formations across all asset classes, but the energy market’s recent price surges in oil and natural gas are on every savvy trader’s watch list. Here’s a breakdown of what happened so far along with some information that can enhance your forecasts.
Energy market key points
December 2024 witnessed a significant spike in natural gas prices due to forecasts predicting an extremely cold winter. With predictions of January being the coldest month in three decades, heating demand surged, leading to concerns about supply adequacy. This situation was further complicated by geopolitical uncertainties surrounding the renewal of a crucial gas transport contract between Russia and Ukraine.
Alongside natural gas, crude oil prices also rose sharply, with West Texas Intermediate (WTI) and Brent crude reaching their highest levels since August 2024. This increase was driven by new US sanctions on Russia and heightened demand amid winter conditions, creating a perfect storm for price escalation.
How the energy markets reacted
The energy markets experienced immediate volatility as natural gas futures opened over 10% higher on certain trading days. Traders adjusted their positions rapidly in response to changing weather forecasts and geopolitical tensions, leading to significant price movements.
With uncertainty surrounding Russian gas supplies, European nations began increasing their demand for liquefied natural gas as they sought alternatives to Russian imports. This shift is expected to have a profound impact on global markets as countries compete for limited supplies.
Elevated energy prices have raised concerns about stagflation in the Eurozone, as rising costs could hinder economic growth while pushing inflation rates higher. Policymakers are now discussing potential interventions to stabilize energy markets amid these pressures.
Future energy market outlook
The potential for renewed tariffs or changes in US energy policy could further complicate market dynamics, so be aware of Trump announcements as they have the power to upend technical analysis and trends.
With US natural gas production expected to increase significantly in 2025, analysts anticipate that supply pressures may eventually temper current price increases. However, if demand remains robust due to continued cold weather or geopolitical disruptions, prices may stabilize at elevated levels rather than returning to pre-surge lows.
As global energy consumption patterns evolve—especially with a growing focus on renewable energy—the traditional fossil fuel markets may undergo structural changes throughout 2025. The interplay between increased production from shale regions like the Permian Basin and fluctuating international demand will be critical in determining future price trajectories.
Conclusion
Keep in mind that oil and gas are influenced by very different factors and should always be viewed as unrelated assets when forecasting. Oil is famous for sweeping trends moving from range highs of $90 (USD) per barrel, falling to $60. OPEC+ are also famous for throttling production and supply to keep prices within that range.
Also, gas doesn’t always become more expensive during the winter months then cheaper in spring. Consider past ranges both recent and historic and wait for opportune moments to buy low and sell high.
Oil appears to be correcting from a high, while gas is gaining bullish momentum. This divergence is not an indicator that can provide insights. If you are new to energies trading, consider using the Exness demo account to get to know the asset class better, and watch out for deep reversals and rapid rallies in the coming months.
This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.
Author:
Paul Reid
Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.