Energy Market Update - 03 February 2025
Energy markets saw mixed movements today, with gas prices rising due to colder weather and storage concerns, while power prices faced downward pressure from increased wind generation. Market sentiment was also influenced by geopolitical factors, including newly implemented U.S. tariffs.
UK gas prices increased slightly, with the NBP front-month contract at 131.60p/therm, up 1.50p from Friday. The TTF front-month contract also climbed to €53.90/MWh, gaining €0.50/MWh. The price rally was driven by forecasts of colder temperatures later in the week and storage levels across Europe sitting at 53%, significantly below seasonal averages. Meanwhile, LNG arrivals continue to support supply, with 13 cargoes expected at UK terminals in the coming weeks. Despite this, bullish sentiment remains, with concerns over gas storage injections later in the year and the potential impact of U.S. tariffs on global trade,
Power markets opened lower, with UK day-ahead baseload falling to £112.69/MWh, down from £130.70/MWh on 31 January. German power prices also dropped, with the baseload front-month contract at €106.70/MWh, reflecting lower demand and improved renewable output. However, wind generation forecasts indicate lower-than-seasonal levels across Europe, which could push prices higher in the coming weeks. French nuclear generation remains stable, with EDF forecasting strong production, keeping French baseload contracts at a discount to German power.
Geopolitical developments remain a key market driver. Over the weekend, the U.S. imposed tariffs on Canada, Mexico, and China, which could disrupt commodity flows. Analysts suggest the impact on gas and oil prices may be limited in the short term, but markets are watching closely. Brent crude settled at $76.76/bbl, slightly lower than the previous session. Meanwhile, carbon prices remained firm, with EUAs above €83/tonne, lending some support to power prices.
Markets remain volatile as traders assess weather risks, storage levels, and geopolitical events. With colder temperatures expected later this week, gas demand may increase, adding further upward pressure on prices. However, LNG arrivals and strong nuclear generation could help stabilise the market.