Commodity volatility: what’s next for global energy?
May 2025
Commodity volatility:
what’s next for global energy?
1 © The Economist Intelligence Unit Limited 2025
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3 © The Economist Intelligence Unit Limited 2025
Commodity volatility: what’s next for global energy? May 2025
Commodity volatility: what’s
next for global energy?
Geopolitical forces unleashed by will tip the US economy into
Donald Trump, the US president, recession (in line with EIU’s baseline
have roiled energy markets and forecast), with implications for
clouded the outlook for hydrocarbon global demand and supply. The
prices. Markets are increasingly direction of hydrocarbon prices has
concerned that Mr Trump’s policies possibly never been more uncertain.
Crude oil What happened to a US recession (in line with our
baseline forecast). Announcements
“drill, baby, drill”? by OPEC+ that the cartel is
price outlook accelerating plans to slowly roll back
The fallout from the trade previous voluntary cuts has added
war launched by the Trump to downward pressures on prices.
administration has led us to slash Improving prospects for peace in
our oil price forecasts, with our Ukraine have also increased the
oil price forecast falling by about chances that US and EU sanctions
US$8/b since the beginning on Russian crude oil will be lifted,
of the year. Investors in futures potentially as soon as later this year.
markets have begun to price in
Trade war has cut US$8/b 90
from EIU's 2025 Brent Forecast
85
price forecast
80
Dated Brent Blend; US$/barrel
Actual 75
February EIU forecast 70
Current EIU forecast
DonaldTrump
Donald Trump returns
returns to to
theWhite
the WhiteHouse
House 65
60
55
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Source: World Bank; EIU. 2024 2025 2026
4 © The Economist Intelligence Unit Limited 2025
Commodity volatility: what’s next for global energy? May 2025
However, a number of factors costs of drilling, with prices of steel
lead us to believe that prices for pipe in the shale patch having risen
dated Brent Blend will stabilise at by about one-third since Mr Trump
about US$64/barrel for the rest came to office, further driving up
of the year and next. Significant the breakeven price for new wells.
drawdowns of OECD commercial It is not surprising that fracking
oil stocks on land continued in early activity, as measured by the frac
2025. We estimate that the market spread count, is down by nearly
is currently still in deficit, and expect a third year on year. Associated
it to remain so until late 2025. uncertainty surrounding on-again,
Sanctions on Russia’s ghost fleet of off-again tariffs will further weigh
oil tankers implemented in the last on drilling activity, not just in the US
days of the US administration of Joe but in other non-OPEC-producing
Biden continue to have a significant countries, especially in Canada.
impact on Russian production. The
Trump administration’s efforts to There are significant risks to
exert “maximum pressure” on Iran our price forecasts. We currently
will add to geopolitical risks. Finally, forecast only a mild recession in
we expect OPEC+, despite its recent the US in 2025, but signs that the
moves, to exert caution in raising downturn may be more severe or
production and put plans on hold at long-lasting would lead to further
the first signs that prices may fall sell-offs and send Brent below
significantly below current levels. US$60/b. OPEC may also decide
to roll back previous production
The threat of lower oil prices are cuts more quickly than we expect in
already undermining Mr Trump’s an effort to capture market share,
promises to boost domestic which would also drive prices down
drilling activity and will continue further. The main upside risks are
to affect investment decisions geopolitical and related to US policy
globally. We expect prices for West vis-à-vis Iran. Production increases
Texas Intermediate (WTI) to average in 2025 in the US, Brazil, Canada
less than US$60/b in 2026, below and Guyana could fall short of our
the levels needed to profitably drill a already modest expectations. Falling
new well in all US producing regions. reserves globally raise the risk that
The Trump administration’s trade the market will remain in deficit for
policies are further adding to the longer, with implications for prices.
5 © The Economist Intelligence Unit Limited 2025
Commodity volatility: what’s next for global energy? May 2025
Natural gas Little relief for natural US tariffs has raised fears that
European economic demand will be
gas prices, despite hit. Similar retaliatory tariffs on Asian
outlook recent sell-off countries (ex-China) and swingeing
tariffs on China—currently paused
for at least 90 days—are also
Market turmoil has also hit natural possible, which would affect the
gas markets, leading us to lower liquefied natural gas (LNG) market.
our forecasts. In late April the Lower Asian demand would lead to
European benchmark title transfer an increase in LNG supply to the
facility (TTF) price fell below US$11/ European market, which would exert
mmBtu, for the first time since downward pressure on the
July 2024. The threat of retaliatory TTF benchmark.
Natural gas prices will remain elevated in Europe and Asia
US$/mmBtu
Europe US LNG (Japan) 16
16
EIU forecast EIU forecast EIU forecast
12
12
8
8
0
0
Q1 Q4 Q1 Q4 Q1 Q4
2024 2026 2024 2026 2024 2026
Note. Benchmark prices quoted are the Title Transfer Facility in Europe,
Source: World Bank; EIU. Henry Hub in the US and contract prices for LNG in Japan.
We still expect gas prices in 2026 in response to the increase in
Europe, Asia and the US to remain global LNG capacity, but they will
higher on average in 2025 than in remain high by historical standards,
2024. Europe will need to replenish which will constrain any recovery in
stocks in the second and third industrial demand.
quarters of 2025, which will keep
upward pressure on prices. We Gas prices will be heavily
also expect US domestic prices to influenced in 2025-26 by
remain about double 2024 levels geopolitics. A political settlement
because of increased demand of the war between Russia and
for feedgas from exporters. Gas Ukraine–particularly if it leads to
demand in Asia will continue to rise, a “bad deal” for Ukraine, as we
but at a slowing rate because of the currently expect–could lead to a
impact of US tariffs. We forecast resumption of sales of Russian
that European prices will fall in gas delivered by pipeline to the
6 © The Economist Intelligence Unit Limited 2025
Commodity volatility: what’s next for global energy? May 2025
European market. This would drive East, which could occur if Mr Trump
down prices in Europe, and also in decides to carry out air strikes
Asia, as LNG would be diverted to against Iran’s nuclear facilities,
that region from Europe. Conversely, would cause prices to spike.
a fresh security crisis in the Middle
Coal price Expensive gas means economies’ efforts to help
developing countries to combat
peak coal is still a climate change. With little financial
outlook way off support forthcoming, especially now
that the Trump administration has
withdrawn the US from the Paris
In emerging markets, coal as an Agreement on climate change,
input to power generation will still coal consumption growth will
remain the far cheaper option for continue apace in many parts of the
power generation. Even before developing world. The recent slump
Mr Trump took office, there was in prices will boost the economic
dissatisfaction with developed incentive to keep burning coal.
Growing demand in 160
EIU forecast
developing Asia will put a 140
floor under coal prices 120
Australian, thermal, Newcastle; 100
US$/tonne 80
60
40
Long-term average
Long-term average (2000-2020)
(2000-2020)
20
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Source: World Bank; EIU. 2024 2025 2026
China probably poses the biggest years, owing to security concerns,
wild card in terms of the outlook which were also behind a ramp-up
for coal prices. We forecast that in coal imports in 2024. Imports of
consumption growth there will coal have slowed sharply this year,
continue to slow in 2025-26, but not least because stocks at power
the country has stopped taking plants are now at record highs. We
delivery of US LNG, which could yet expect the government to relax
boost coal demand. China has also stock-building requirements, which
added significantly to its coal-fired should ease some of the upward
power-generation capacity in recent pressures on global coal prices.
7 © The Economist Intelligence Unit Limited 2025
Commodity volatility: what’s next for global energy? May 2025
Meet the EIU team
Matthew is a key contributor to Specialist subjects
EIU’s Global Forecasting team. He Business strategy,
leads our coverage and forecasts macroeconomics,
for 25 critical commodities across forecasting, emerging
industrial raw materials, agriculture markets, financial markets,
and energy, as well as the critical commodities, critical
minerals that are key to the green minerals, subnational
Matthew Sherwood transition. He and his team leverage economies
real-time data and EIU’s in-house
Lead commodities analyst country and industry expertise Languages
and senior global economist to forecast how geopolitical risk English
factors will influence commodities
Find out more markets. Location
London
Matthew also leads EIU’s coverage
of central and eastern Europe,
including a recent series exploring
the future of the region’s automotive-
focused business model amid the
green transition. He has previously
led EIU’s coverage of the US
economy and politics.
8 © The Economist Intelligence Unit Limited 2025
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