Energy Trading: How Global Markets Shape Prices
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Energy prices fluctuate based on global market trading rather than a single entity. For instance, Brent crude surpassed $111 and WTI neared $100 due to shipping restrictions in the Strait of Hormuz, a critical route for 20% of liquefied natural gas and 17% of oil.
Prices also differ from region to region. In early June, spot LNG in Northeast Asia traded at $18.20 per MMBtu, while Southwest Europe stood at $16.35. Such gaps show how buyers compete for cargoes.
Do futures prices always reflect what is happening in the real world?
Not always. ING analysts noted that Dated Brent, which reflects physical cargoes, hit a record $144.46 a barrel and traded around $30 above Brent futures, meaning that screens had not fully captured the scale of the disruption.
How does a shock in gas reach coal and power bills?
Because markets link different fuels together. Soaring prices pushed countries including China, India, South Korea, Indonesia and Viet Nam to burn more coal for electricity, a reminder that a shock in gas can ripple into coal and power bills.
ING's commodities team states the market logic bluntly: "the only way energy prices move lower is the resumption of flows" through the strait. Traders, in other words, are pricing not just supply today but the risk of what could happen tomorrow.
For consumers and businesses, the lesson is that energy prices are a global story told locally. Decisions made on trading floors thousands of kilometres away, and events at a chokepoint most people never see, eventually show up in electricity tariffs, fuel prices and the cost of goods on the shelf.
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