Energy Market Update - 06 January 2025
The energy markets opened weaker today, reflecting milder weather forecasts and stabilising gas supplies, despite ongoing concerns about reduced Russian gas flows.
Natural gas prices softened across European hubs following the weekend, with the TTF spot trading at €46.96/MWh, down from €49.62/MWh on Friday. UK NBP spot prices fell slightly to 124.15 pence/therm. This easing reflects milder-than-expected weather during a critical winter period, bolstered by healthy LNG arrivals in Europe, including 10 expected cargoes in the UK this month. However, colder weather forecasts for later this week and declining EU storage levels, now at 70.33% capacity, may add upward pressure. Meanwhile, Norwegian supply remains steady at 336mcm/day despite unplanned outages at Kollsnes.
Power markets mirrored gas movements, with UK spot base power prices slipping to £88.81/MWh. Wind generation is projected to drop later in the week, increasing reliance on gas-fired plants for electricity. EU power prices remain underpinned by strong carbon market prices, with EUAs trading at €75.94/tonne. In the UK, colder-than-average temperatures are predicted, likely boosting demand for heating and power, while falling wind output could constrain renewable generation.
Geopolitical factors continue to influence market sentiment. The expiration of the Ukraine transit deal has further limited Russian flows, with key pipelines like Velke Kapusany and Sudzha now at zero. LNG imports into Europe have ramped up to compensate, alongside robust demand in Asia, where JKM LNG prices rose to $15.12/MMBtu. In addition, recent damage to the Estlink 2 interconnector between Finland and Estonia highlights ongoing energy infrastructure vulnerabilities.
Overall, the energy markets remain finely balanced, with short-term price movements driven by weather fluctuations, supply chain dynamics, and geopolitical developments.