Energy Market Update - 06 March 2025
Energy markets moved lower yesterday as geopolitical tensions appeared to ease, with reports of a potential minerals deal involving President Trump and European leaders. Market sentiment was also influenced by the European Commission reaffirming its gas storage targets, though discussions around flexibility have introduced some uncertainty.
European gas markets declined despite the EU Commission’s confirmation of the 90% gas storage target by 1 November. Some market participants initially interpreted the flexibility clauses as an allowance for delayed refilling until December, though the official stance limits such extensions to exceptional cases. Storage levels are notably below last year’s figures, with EU stocks at 37.32%. UK and European gas contracts saw losses, with TTF Front Month closing at €41.51/MWh (down from €43.46), and NBP Front Month at 100.10p/therm (down from 103.57p). Norwegian flows remained stable at 333mcm. LNG deliveries to the UK are expected to remain strong, with 10 cargoes due in the next two weeks. The EU’s ongoing delay in finalising a Russian gas phase-out roadmap has contributed to bearish sentiment, as some market players now speculate that certain Russian flows could return in the future.
UK power prices tracked gas lower, with the UK Front Month Baseload contract settling at £82/MWh (down from £85) and the Front Season at £80/MWh (down from £82). Strong renewable generation, particularly from wind and solar, helped suppress power demand. Continental power prices also declined, reflecting bearish gas movements. The German conservative party, following its recent election victory, has reignited discussions on the potential revival of nuclear power, with industry bodies suggesting that up to six plants could be restarted despite their official closure in 2023. This has introduced a new layer of uncertainty in long-term European energy planning. Meanwhile, ongoing Trump-Zelensky talks remain a key factor in wider market stability, as speculation continues over the potential for a ceasefire in Ukraine, which could lead to shifts in global energy trade flows.
Brent crude dropped to $69.30/bbl (from $71), influenced by OPEC’s April production increase and US-China trade concerns. The latest US trade policy shift, imposing 20% tariffs on Chinese imports, has added pressure to global demand forecasts. EU carbon prices remained steady at €69/t. Coal prices also edged lower, with the Rotterdam CIF contract for 2026 at $102.16/tonne. Henry Hub natural gas rose slightly to $4.45/MMBtu, while Asian LNG (JKM) declined to $13.73/MMBtu. The market remains alert to potential policy adjustments in the US, with speculation that Trump could ease certain energy sanctions, particularly those affecting oil and LNG flows, should broader diplomatic agreements take shape.
Market sentiment remains cautious, with traders monitoring geopolitical developments, storage strategies, and weather forecasts as Europe nears the end of the heating season. The unfolding US-Europe mineral deal, continued uncertainty over the EU’s Russian gas policy, and shifting power generation strategies in Germany all contribute to a complex outlook for energy prices.