Energy Market Update - 07 March 2025
Energy markets saw another sharp downturn yesterday, with European gas prices dropping significantly amid renewed discussions on resuming Ukrainian gas transit. Weaker UK gas prices also pressured power markets, while oil and carbon prices remained subdued.
European gas prices tumbled as traders reacted to news that EU leaders are pushing for negotiations to restart Russian pipeline gas transit via Ukraine. Since the transit agreement expired in December, Slovakia has been lobbying for its resumption, fearing the loss of critical transit revenues. The European Commission is also considering extending gas storage targets until 2027, with 90% storage still required by 1 November, though there is debate about introducing more flexibility into the policy. Market sentiment suggests that easing geopolitical tensions and a potential increase in Russian supply could weaken long-term price support.
At the same time, analysts remain cautious about the US stance, as any easing of restrictions on Russian gas flows could undercut its LNG exports to Europe. The US position on potentially taking control of the damaged Nord Stream 2 pipeline remains unclear, with speculation that such a move could be aimed at stabilising global energy markets rather than increasing LNG market share. A breakthrough in peace negotiations, expected to be discussed in Saudi Arabia in the coming days, could further reshape European gas supply dynamics.
At the close, the TTF front-month contract settled at €38.24/MWh, down from €41.51, while the UK NBP front-month fell to 93.03p/therm from 100.10p. This morning, gas markets showed a slight recovery, with the TTF front-month trading at €37/MWh. Norwegian gas flows to the UK were stable at 333 mcm/day, while EU gas storage levels were reported at 37.17% full.
Lower gas prices and increased gas-fired generation expectations drove UK power prices lower. The UK baseload front-month contract dropped to £78/MWh, down from £82, while the front-season contract declined to £77/MWh from £80. Forecasts indicate that wind power output will be 10-20% below seasonal norms next week, with expected generation of 8.6GW.
Additionally, reduced transmission capacity on the UK-Norway interconnector (NSL) has limited cross-border flows, with capacity halved to 0.7GW until 11 March before increasing to 1GW until 8 April. The power market is also adjusting to shifting European energy policies, particularly in Germany, where ongoing discussions over future energy strategy and industrial competitiveness could influence long-term pricing.
Brent crude remained steady at $69.46/bbl amid concerns over potential US tariffs on European industries. The Trump administration’s recent decision to pause certain tariffs on Mexico and Canada while maintaining those on China has raised questions about the direction of trade policy. European carbon prices softened further, with EUA December 2025 contracts falling to €67.32 from €69, as weaker industrial output forecasts and mild weather expectations pressured demand for emissions allowances. Meanwhile, coal prices eased slightly, with the ARA CIF Cal-26 contract settling at $101.12/tonne.
Market participants remain focused on geopolitical developments, particularly negotiations around Ukrainian gas transit and US energy policy. Any formal agreement could significantly impact supply expectations and market direction in the weeks ahead.