The tariff conflict initiated by the US government is causing extreme volatility on the financial and energy markets worldwide this week. Prices are significantly higher than in the previous year and gas-fired power plants played a key role in power generation last winter. An overview.
Gas prices fall to 6-month low
Gas prices fell below EUR 35/MWh on the Dutch TTF at the beginning of the week, the lowest level in six months. The tariff conflict between the USA and the EU on the one hand and the USA and China on the other is weighing on gas prices.
The dramatic fall in US government bonds is likely to have forced the US government to give in on Wednesday. The hastily announced tariff pause subsequently led to a significant recovery on the markets.
The financial and energy markets are on a rollercoaster ride due to the erratic approach of the US administration. There is currently no end in sight and the suspicion of market manipulation looms large.
No tariff pause for China
So far, the US administration has not suspended the tariffs against China (104%). China had announced counter-tariffs of 84% on US imports. With regard to the LNG market, the conflict between the USA and China could also mean that Europe is now facing a higher supply of LNG in the summer than previously assumed.
In the last 12 months, around 70 LNG deliveries went from the USA to China. China recently announced that it would not be importing any more LNG supplies from the USA for the time being, and these supplies could now be diverted to Europe.
Due to the expected destruction of gas demand in the industrial sector and the improved LNG supply forecast, some speculative investors are also likely to have withdrawn from the gas market. The liquidation of these long positions is likely to have supported the downward movement on the market at the beginning of the week.
Higher price level compared to the previous year
Due to the significantly emptier gas storage facilities than in the previous year, the price level in April 2025 is nevertheless significantly higher than in the previous year. In April 2024, the gas price on the TTF spot market was quoted at around EUR 27/MWh, around EUR 10/MWh less than currently.
Prices at the US Henry Hub have more than doubled compared to April 2024 from USD 1.80/MMBtu to USD 3.80/MMBtu (before the tariff conflict at USD 4.20/MMBtu). On the Asian JKM, the front month was quoted at around USD 9.50/MMBtu a year ago compared to around USD 12/MMBtu recently, an increase of around 30 percent.
The high gas prices are weighing on the Asian region, particularly China, where demand for gas fell by 3.5% in the January-February period. Chinese buyers therefore reduced their demand for spot LNG deliveries, which means that long-term, oil-indexed LNG contracts are likely to be in the money for them and were preferred.
Natural gas key role for electricity market
Combined European electricity generation from wind, solar and hydropower fell by around 70 TWh last winter compared to winter 2023 – a decrease of around 10%.
The resulting repeated dark doldrums caused high price fluctuations on the energy markets. Gas-fired power plants played a key role in supporting the electricity system.
Electricity production from gas-fired power plants rose by around 50 TWh during this period, which corresponds to an increase of around 20% compared to the previous period. On average, around 50 GW of electricity output from gas-fired power plants was connected to the grid, compared to around 40 GW in winter 2023.
Last winter thus impressively demonstrated how important flexibility on the gas market is for the security of the electricity supply.