Energy Market Update - 05 February 2025
Energy markets experienced a mixed session, with natural gas prices declining due to improved supply prospects, while power prices showed some volatility amid fluctuating renewable generation and colder temperature forecasts. Geopolitical factors, including China’s new LNG tariffs and ongoing Russian sanctions, remain key influences.
UK NBP spot gas prices fell to 132.25p/therm, with the front-month contract also declining to 126.65p/therm, reflecting a wider selloff in the market. European TTF gas settled at 53.56€/MWh, while German THE prices stood at 54.56€/MWh. The downward trend follows China’s decision to impose a 15% tariff on US LNG imports in response to recent US tariffs, which could divert more cargoes towards Europe. Market expectations suggest that Europe may see increased LNG supply as US cargoes look to avoid the additional costs of selling into China.
Despite this, sentiment remains uncertain due to supply risks. Norwegian pipeline flows have been impacted by unplanned outages at Åsgard and Njord, reducing total exit nominations to 318.3 mcm/day. Meanwhile, LNG arrivals remain strong, with ten cargoes expected at UK terminals in the coming weeks. Storage withdrawals in Europe have slowed, with stocks currently at 51.97% full, above 2021 levels for this time of year. While storage levels appear comfortable, the prospect of colder-than-average temperatures across northwest Europe later in February could drive renewed demand, putting upward pressure on prices. Additionally, European countries, including Italy and the Netherlands, are reportedly considering adjusting storage refill targets for the next winter due to concerns over high gas prices making long-term storage commitments less profitable.
UK power prices mirrored gas movements, with day-ahead baseload increasing to £118.86/MWh, while the UK front-month contract fell to £104.15/MWh. European prices saw mixed moves, with French baseload at €142.58/MWh and German contracts at €150.09/MWh. Wind generation forecasts indicate a choppy outlook, with strong output expected from next week, which could lower gas-for-power demand. The return of the 1GW ElecLink interconnector between the UK and France on 9 February is expected to improve UK imports, stabilising prices in the coming weeks. Additionally, ongoing nuclear outages, including planned maintenance at Heysham and Hartlepool, continue to influence power supply balances.
Brent crude oil remained relatively stable at $76.20/bbl, with concerns over a potential trade dispute between China and the US affecting demand sentiment. The meeting between Trump and Netanyahu in Washington has also drawn market attention, as any geopolitical developments in the Middle East could impact global energy markets. Meanwhile, coal prices declined, with API2 year-ahead contracts at $114.75/tonne, reflecting shifting fuel-switching dynamics in power generation. Carbon prices were also lower, with EUA Dec-25 at €80.88/tonne.
The energy market remains volatile as geopolitical tensions, weather forecasts, and supply fundamentals drive price movements. Colder temperatures and fluctuating renewable output could introduce further price swings in the coming weeks, while trade disputes and storage policy shifts may have longer-term implications for market balance.