Energy Market Update - 07 January 2025
The energy market showed a softening trend today, driven by healthy gas supplies, increased LNG arrivals, and a drop in demand expectations due to milder weather.
Natural gas prices across Europe and the UK opened lower, with the NBP front month contract trading at 116.70p/th, down 0.60p/th, and TTF at €46.80/MWh, down €0.25/MWh. This decline comes despite colder weather supporting prices initially, as strong LNG send-outs and oversupplied systems offset demand increases. UK temperatures are forecasted to fall to 6 degrees below seasonal norms, while wind generation is also set to decline, raising gas burn for power. Six LNG vessels are expected to arrive in the UK by the end of the week, supporting system balance amidst falling European gas storage, currently at 69.94% capacity.
In power markets, contracts also moved lower. The German front month baseload price dropped to €106.60/MWh, down €1.30/MWh. UK day-ahead power prices decreased to £88.81/MWh. Weak renewable generation due to calmer weather is shifting reliance towards gas-fired power. At present, gas accounts for 36% of UK power generation, with wind contributing 28%. This mix could tighten further as demand rises in the coming days. Meanwhile, carbon prices have eased, with the Dec-25 EUA benchmark trading at €74.50/tCO2e, contributing to lower power prices.
Norwegian gas exports remain stable at 336mcm/day despite continued unplanned outages. The Kollsnes processing plant remains offline, but record production at the Troll field highlights Norway’s pivotal role in European gas supply. In contrast, Russian pipeline flows remain at zero. In Asia, LNG spot prices are subdued as high inventories deter buying, creating competitive global dynamics that weigh on European benchmarks.
Oil markets showed slight weakness, with Brent crude trading at $76/bbl, down from $77/bbl, while EU ETS carbon and other energy benchmarks also recorded minor corrections. Colder weather and weak renewable output are expected to drive near-term demand increases, but overall market sentiment remains stable as supplies appear robust.