Energy Market Update - 04 February 2025
Energy markets showed mixed movements today. Gas prices remained firm despite a slight easing in weather-driven demand, while power prices edged lower due to improved wind generation. Geopolitical tensions surrounding U.S. tariffs and Chinese countermeasures continued to influence market sentiment.
UK gas prices held steady, with the NBP day-ahead contract at 134.50p/therm, reflecting a small increase. The TTF front-month contract is pricing at €53.30/MWh, slightly down from previous levels. European gas markets are reacting to a milder weather outlook and news that the U.S. President has temporarily paused some newly introduced tariffs following negotiations. However, China has retaliated with tariffs on U.S. LNG, which may result in more LNG cargoes being diverted to Europe. Despite this, colder temperatures expected later in the week could lead to increased storage withdrawals, adding to supply concerns. Additionally, unplanned outages in Norwegian production, including at Sleipner and Njord, have reduced flows by 16mcm, with further supply disruptions reported in the UK at Teesside CATS and Barrow.
Power prices in the UK and Europe softened, driven by a brief increase in temperatures and stronger wind generation. The UK day-ahead baseload price dropped to £109.99/MWh, down from £112.69/MWh. German power prices also declined, with the front-month baseload contract at €104.75/MWh. UK temperatures, initially below seasonal norms, are expected to rise midweek before falling again at the weekend, impacting demand patterns. Wind speeds are currently above seasonal averages but are expected to drop by Friday, potentially providing some support to power prices. Meanwhile, geopolitical concerns over potential U.S. tariffs on the EU and UK remain a factor, as any trade restrictions could weigh on economic activity and power demand.
Other commodities showed slight declines. Brent crude fell to $75.96/bbl after the U.S. postponed some planned tariffs on Canada and Mexico, reducing immediate concerns over supply disruptions. EU carbon prices also weakened, with EUA Dec-25 contracts trading at €80.96/tonne, down from €83.93/tonne. Meanwhile, coal prices remained relatively stable at $117.50/tonne. With colder temperatures expected, market participants remain cautious about further storage withdrawals and potential shifts in LNG flows, which could influence price movements in the coming days.