Energy Market Update - 06 February 2025
Energy markets saw a bullish trend today, with gas and power prices rising due to persistent cold weather forecasts, lower-than-average storage levels, and tight supply fundamentals. Additionally, carbon prices remained firm, supporting power market movements.
UK gas prices continued their upward trend, with the NBP day-ahead price settling at 134.20p/therm, reflecting a 1.95p increase from the previous session. The front-month contract for March-25 also rose to 130.47p/therm, gaining 3.82p. European gas markets experienced similar price movements, with the TTF front-month contract reaching €54/MWh, reflecting a rise from the previous settlement.
The primary driver for these increases was the cold weather forecast across Northwest Europe, expected to persist until mid-February, pushing up demand for heating and gas withdrawals from storage. European gas storage levels stood at 51.3% full, significantly lower than 68.82% at this time last year.
Supply-side fundamentals showed mixed developments—Norwegian flows to Europe increased to 329mcm/day following the resolution of maintenance issues at Njord and a partial recovery at Asgard. The UK system opened 3mcm short, indicating tight supply conditions.
LNG arrivals remain steady, with 10 cargoes expected to reach the UK over the next 17 days, further strengthening the supply outlook. However, concerns over potential future storage deficits and the ongoing reduction in Russian pipeline gas flows kept sentiment bullish.
UK power prices followed the gas market’s bullish trend, with the UK day-ahead baseload settling at £118.86/MWh, up 1.16/MWh from the previous day. March-25 contracts also rose to £106.75/MWh, reflecting the impact of gas prices and steady carbon prices. Wind generation forecasts suggest an increase in output for the coming week, which could provide downward pressure on power prices in the short term.
However, a significant reduction in wind generation is expected towards the end of February, potentially pushing prices higher again. The 1GW Eleclink interconnector between the UK and France, which returned to service after a long-term outage, is expected to stabilise supply margins and put some bearish pressure on prices as imports from France resume.
Elsewhere in the energy complex, Brent crude saw a slight decline, settling at $74.61/bbl, down $1.59 from the previous session. Market sentiment remains cautious as traders assess the impact of China’s recently announced tariffs on U.S. oil, which could disrupt trade flows.
Coal prices strengthened, with the API2 front-year contract rising to $115.31/tonne, reflecting firm demand. Carbon prices held firm, with EUAs at €81.12/tonne and UK ETS at £45.73/tonne, providing additional support to power markets.
With colder-than-average weather driving gas demand and power prices tracking movements in gas and carbon markets, storage concerns and geopolitical risks are keeping markets volatile, while LNG supply plays a key role in maintaining stability.