Energy Market Update - 08 January 2025
Energy markets experienced mixed movements today, with short-term bullish drivers like cold weather and supply constraints contrasting with a longer-term bearish outlook influenced by LNG availability and milder weather forecasts.
Natural gas prices saw moderate fluctuations, with the NBP spot rising to 119.20p/therm and the TTF spot closing at €47.52/MWh. Early trading saw bearish sentiment dominate due to Norwegian flow stability and LNG sendouts remaining robust at 79mcm/day. However, colder-than-average temperatures kept UK demand elevated, leaving the system undersupplied by 8mcm/day. EU gas storage levels remained at 69.34%, slightly below recent figures, reflecting significant withdrawals during the cold spell. While current fundamentals are short-term bullish, forecasts for milder weather in February and an uptick in LNG arrivals are expected to pressure prices lower as January progresses.
Power markets followed a similar trend, with prompt prices supported by cold weather and reduced renewable output. UK spot power prices rose to £161.56/MWh, reflecting increased demand and low wind generation, which is forecast to remain more than 20% below seasonal norms throughout the week. Further along the curve, German Baseload Feb-25 prices dropped by €2/MWh, mirroring softer gas markets. The reduced capacity of the IFA1 interconnector between the UK and France, alongside ongoing geopolitical risks in the Baltic Sea, has added to market uncertainty.
Brent crude oil rose to $77.81/bbl, supported by tight supply conditions from both US and OPEC producers and rising demand expectations due to cold US weather. Positive US economic data also buoyed markets, with employment figures suggesting stronger growth potential. Meanwhile, European carbon prices held steady at €74/tonne, indicating stability in emission allowance markets despite subdued trading activity.
The coming weeks will be shaped by LNG deliveries, wind generation recovery, and geopolitical developments, particularly regarding energy security in Europe. With milder weather and increased LNG arrivals on the horizon, markets are poised for potential bearish corrections.