Energy Commodities in Q2- Where are they Heading in Q3?

Energy commodities were the worst-performing sector in Q3 and declined over the first six months of 2025. While Rotterdam coal and distillate crack spreads rose, oil, gasoline, gasoline refining spreads, natural gas, and ethanol swaps posted losses in Q2 2025.  

I ended my Q1 energy report on Barchart with, “Expect lots of volatility in the energy commodities, and you will not be disappointed.”

Crude oil and natural gas prices were volatile in Q2, as events surrounding Iran led to rallies before a ceasefire, followed by a decline in prices. While most energy commodities moved lower, the potential for continued price volatility remains as the sector heads into the second half of 2025. 

Crude oil prices move lower in Q2 and over the first six months of 2025

WTI NYMEX crude oil futures moved 8.91% lower in Q2 2025. 

The quarterly chart highlights the $55.12 to $78.40 per barrel range for Q2, with the nearby futures contract settling at $65.11 per barrel on June 30, 2025. WTI crude oil futures were 9.22% lower over the first six months of 2025, but were slightly higher than the Q2 closing level at near the $68 per barrel level in mid-July. 

Brent crude oil futures on the Intercontinental Exchange moved 9.36% lower in Q2 2025. 

The quarterly chart highlights the $58.39 to $81.40 per barrel range for Q2, with the nearby futures contract settling at $67.77 per barrel on June 30, 2025. ICE Brent crude oil futures moved 9.20% lower over the first half of 2025 but were slightly higher than the Q2 closing level at just over the $70 per barrel level in mid-July.

Crude oil rallied after Israel attacked Iran and the U.S. bombed Iranian nuclear infrastructure in June, but the ceasefire caused the rally to run out of steam. 

Oil products reflect Middle East uncertainty

Gasoline is the most ubiquitous oil product, while heating oil is a proxy for other distillates, including diesel and jet fuels. 

NYMEX gasoline futures moved 9.54% lower in Q2. 

The quarterly chart highlights the $1.8720 to $2.3950 per gallon wholesale Q2 range, with the nearby futures contract settling at $2.0721 per gallon on June 30, 2025. NYMEX gasoline futures moved 3.13% higher over the first half of 2025 and were slightly higher than the Q2 closing level at over the $2.17 per gallon level in mid-July.

Gasoline followed crude oil in Q2, ignoring the seasonality that tends to lift prices during spring and summer as gasoline demand increases.  

NYMEX heating oil futures moved only 0.14% lower in Q2. 

The quarterly chart highlights the $1.8925 to $2.6706 per gallon wholesale Q2 range, with the nearby futures contract settling at $2.2763 per gallon on June 30, 2025. NYMEX heating oil futures moved 1.73% lower over the first half of 2025 and were higher than the Q2 closing level at over the $2.40 per gallon level in mid-July.

While WTI crude oil is preferable for gasoline processing, Brent crude oil, with a slightly higher sulfur content, is processed into distillate oil products. Concerns over hostilities in the Middle East contributed to the outperformance of heating oil futures in Q2 compared to crude oil and gasoline futures. 

Natural gas prices decline

U.S. natural gas futures for delivery at the Henry Hub in Erath, Louisiana, led the energy sector on the downside in Q2 2025 with a 16.10% decline. 

The quarterly chart highlights the $3.007 to $4.230 per MMBtu Q2 range, with the nearby futures contract settling at $3.456 per MMBtu on June 30, 2025. NYMEX natural gas futures moved 4.87% lower over the first half of 2025 and were lower than the Q2 closing level at near the $3.45 per gallon level in mid-July.

Concerns over global LNG supplies, stemming from hostilities in the Middle East, led to elevated Q2 2025 natural gas prices that traded within a higher range than the Q2 2024 range of $1.649 to $3.161 per MMBtu. 

Coal moved higher, while ethanol declined

Coal for delivery in Rotterdam, the Netherlands, moved 3.66% higher in Q2, settling at $107.75 per metric ton on June 30, 2025. The coal futures were 4.77% lower over the first six months of 2025. Coal futures prices were slightly lower than the Q2 closing level in mid-July 2025. 

Ethanol is a biofuel mixed with gasoline due to the U.S. government mandate. Chicago ethanol swaps moved 2.61% lower in Q2, settling at $1.6800 per gallon wholesale on June 30, 2025. The ethanol futures edged only 0.59% lower over the first six months of 2025. Ethanol swap prices were higher in mid-July 2025 at around the $1.7350 per gallon level. 

Expect lots of volatility in Q3 and beyond- Oil remains under pressure

While the situation in the Middle East has calmed since the ceasefire between Israel/the U.S. and Iran, the region remains a tinderbox. Any hostilities over the coming weeks and months could cause sudden rallies in the crude oil, oil product, and natural gas futures markets due to supply concerns. As China is a leading consumer of crude oil, improvements in China’s economy could boost demand, supporting prices.  

Meanwhile, OPEC+ has increased petroleum output, and the U.S. energy policy now favors a “drill-baby-drill” and “frack-baby-frack” approach to oil and gas. Increasing U.S. and OPEC+ output could put downward pressure on prices. The bottom line is that petroleum and product prices could be highly volatile over the second half of 2025. Coal and ethanol prices will likely follow oil and oil product price trends. 

Natural gas is a seasonal energy commodity that tends to peak as winter approaches. Seasonality could support higher natural gas prices in late third quarter and fourth quarter of 2025. 

Expect continued volatility in the energy sector, and you will not be disappointed.