Energy Market Update: May 2025

Thanks to a generally mild April, we saw prices start to fall through the month. As we get closer to the start of higher capacity prices on 6/1/2025, end users will see their prices rise as more of those high-priced months are considered in their quotes. We’ve also seen a sharp rise in market volatility during the last week of April that looks poised to continue into May.

We continue to see market fundamentals that are worrisome for energy buyers:

• The number of US gas drilling rigs is about 15% lower than this time last year. With Oil prices falling, this could lead to a correlated reduction in gas production long term.
• Natural Gas storage injection levels are now just above the 5-year average and 435 Bcf below last year.
• PJM continues to face issues related to its capacity market structure and as a result of cases brought against them, have moved the 26/27 auction to July. We saw a major development this month with FERC approving the cap of $325 and floor of $175 for the 26/27 and 27/28 auctions. This offers some short-term certainty but does little to solve the long-term issue of potential generation capacity deficits.

The wholesale energy markets watch these factors, and changes can push prices up or down on a daily basis. Based on where we stand now, we recommend evaluating these strategies:

• We recommend locking in your energy price through at least the next 12 months as soon as practical. With the forward curve flattening, longer terms are becoming more attractive.
• Consider a capacity and or transmission passthrough structure. While we now have a capacity cap for certain years, different suppliers may use different estimates, making these offers more difficult to compare than a passthrough structure.
• Invest in a plan to reduce your peak demand and overall energy consumption, if you haven’t already. With the rise in capacity prices seemingly here to stay, lowering your associated PLC and or NSPL tag could have substantial price benefits for the following year.

Action Advice

Your to-do list for May and heading into summer:

• Make sure you have a good relationship with a trusted energy advisor – you will want to have someone with experience and expertise watching the markets for you.
• As you budget for 2025 and beyond, expect prices to be higher than you are paying now.
• Monitor the broader economic conditions as these can influence energy prices.

Want to help your business navigate the current market? Get started with your Shipley Energy Advisor today!

Contact An Advisor ->

Natural Gas Market Update

• May 2025 NYMEX expired at $3.17/MMBtu.
• EIA Inventories rose 104 Bcf last week which was lower than the median estimate of +109 Bcf but much higher than the 5-year average of +58 Bcf. Inventories jumped to 2.041 Tcf, now a surplus of 0.2% to the 5-year average.
• March’s warmer than anticipated weather trends across much of the US caused an early start to the injection season.
• Predictions for storage over the next four weeks show higher than normal injections. If this holds true, the surplus to the 5-year average could grow to as much as 120 Bcf.

Factors impacting the natural gas markets currently

• We are seeing continued market volatility. There is a lingering concern about supply and demand, especially with the uncertainty of how much demand we will see in the peak summer cooling season. This will coincide with record LNG exports and economic risks.

Action Advice

Due to the volatility, we recommend checking in frequently with your account manager for daily changes to the market and opportunities to lock in during sell-offs.

Other rate options include Basis Only or NYMEX Lock deals to separate the two elements of your natural gas supply price to look for potential value vs standard Fixed pricing. For those who want to float their NYMEX, consider a cap and floor structure to economically manage your risk. Ask your Account Manager for details. 

 May 2025 Natural Gas NYMEX Settlement Price: $3.170/MMBtu

Last month: April 2025 Natural Gas NYMEX Settlement Price: $3.950/MMBtu

Last year: May 2024 Natural Gas NYMEX Settlement Price: $1.614/MMBtu

Contact An Advisor ->

Petroleum & Refined Products

The early spring rally in prices was cut short on April 3rd when tariff news hit global markets, which suffered the worst single day loss since 2020, with aggregate indexes down as much as 6%.  To add to the selling pressure on crude and refined products, OPEC announced that their plan to finally increase curtailed crude production would begin.  This risk of news sent shockwaves and WTI crude oil fell from $72/bll to $55 (-23%) in a matter of a few days.  This weakness manifested itself in HO and RBOB futures prices as well, causing overall flat price to collapse -20% or $0.46 in front month RBOB futures and  $0.40 in HO/ULSD futures.  The market tested and held 4-year lows and ultimately held for now.  If WTI crude breaks $55bbl support we expect next support does not come in until around $50bbl with further severe volatility potentially sending crude in the $40bbl range. 

We expect retail pump prices will continue to outpace wholesale rack prices to the downside as the street “catches up” to the futures and wholesale market.  This is good news for the forces at play who want energy prices lower to cap inflation and lower Fed Funds interest rates.

Cash and regional basis markets:

ULSD – Backwardation in near term reached multi-year highs in April of $0.08cpg, which offers a stark contrast to the doom and gloom outlook.  Some industry trade chatter pointed out that NY Harbor NYMEX delivery point was potentially short on barrels for delivery causing a spike in the front spread which didn’t manifest itself into regional pipe and physical basis.  We felt the front spread strength was overdone to the upside as price action pointed to stop outs type of momentum as traders liquidated short positions.  As in the previous last few months, the spread backwardation sold off near expiration down to $0.0250 – $0.0350cpg roll. 

Headlines:

• Oil futures were bouncing back Tuesday (5/6) after hitting their lowest levels in more than four years Monday (5/5), with refined products also seeing increases.
• Regionally gasoline inventories have been tightening throughout the U.S. and Monday’s (5/5) fire at Valero Energy’s 149,000 b/d Benicia refinery is being reflected in stronger gasoline markets on the West Coast as San Francisco CARBOB premiums are currently in the $1 area. There also appears to be some tightness in the New York Harbor as prompt barge premiums are running a little more than 2cts over futures.
• June RBOB briefly popped over the $2.08/gal level this morning and is trading at $2.077/gal, up 5.42cts. The heavier gains are concentrated at the front end of the curve, and that is contributing to solid backwardation through the summer months.
• Diesel is up and while U.S. inventories have been tight for months now, the concern comes from the demand side as not only is diesel out of season, slowdowns in ports and agriculture can have a profound impact on demand in the short term.
• However this week HO took out the Apr 1.9373 low overnight on the Sunday CME Globex reopen (with the help of 5-7c backwardation with current futures structure being lower) 1.9338 low.  Having since bounced roughly 8cpg since.  RB is significantly higher and didn’t come close to the April 1.8807 low, overnight Sunday low of 1.9582 low having bounced ~11c off those lows.  
• Saturday OPEC vowed to pull forward the June crude production increase to May and slightly increase it.  The gradual production increases were put in place going all the way back to when OPEC put in production cuts during covid demand collapse.  Saudi Arabia fighting for market share has been the adult in the room following the production quotas, while their patience is wearing thin with Iraq and Kazakhstan who continually over pump to their requirements.  The motive here is twofold: the White House pressuring Saudi Arabia to bring production back and push prices lower, while this would also hurt US shale oil producers.  
• There needs to be an offset as the US tries to choke of Iran selling their crude as they inch closer to a nuclear weapon.  Lower oil prices will manifest more quickly into lowering inflation, hence the ability for the Fed reserve to be in a position to ultimately cut interest rates.
• The U.S.-China trade deal is bullish for energy because it reduces tariffs, potentially from 145% to 30% on Chinese imports and from 125% to 10% on U.S. goods, lowering costs and boosting trade in energy products like U.S. LNG and ethane exports. This tariff relief is expected to revive demand, particularly for oil and petrochemicals, benefiting U.S. energy exporters and Chinese energy markets. Increased energy cooperation and market confidence from the deal further support growth in the sector.
• Lower oil prices also hinders countries from more easily funding wars and geopolitical conflicts and terrorism.
• Energy prices remain prone to swift and severe volatility due to news headlines driving trading more than ever before.  A 10% move in prices is more commonplace than in years past, pre Russia Ukraine War and Covid.

Action Advice

With the forward curve hovering around the $2.00 mark it is seasonally a great time for customers and end users to start to lock in their pre-buy heating oil programs.  Fixed price gasoline customers will find much cheaper prices down the forward curve of 10-20cpg.  The market appears to be pricing in a recession.  To the contrary, current gasoline demand remains robust as prices continue to fall into peak summer demand season.