Energy Market Update - 10 February 2025
Energy markets continued their bullish trend, driven by colder-than-expected temperatures across Europe, lower renewable generation, and increased demand for LNG. Gas and power prices rose as a result, while oil prices remained stable.
European gas prices increased amid colder weather, lower wind generation, and storage withdrawals. The UK NBP Front Month contract rose to 136p/therm, while the TTF Front Month contract climbed to €57/MWh, reflecting strong demand. European gas storage is now below 50%, with Germany and Italy maintaining the highest levels at 50% and 60%, respectively, while France and the Netherlands have fallen to around 30%. Ukraine continues to import gas from Slovakia, Hungary, and Romania as storage withdrawals push reserves below 10%.
Geopolitical developments are adding further volatility to the market. Reports indicate that Presidents Trump and Putin have held discussions regarding a potential resolution to the Ukraine conflict, though details remain unclear. President Zelenskyy has proposed a deal involving US investment in Ukraine’s rare earth minerals sector as part of a broader resolution.
Meanwhile, LNG flows from the US to Asia remain constrained due to recently imposed tariffs, leading Asian buyers to seek alternative supplies, increasing competition with Europe for cargoes. Supply concerns persist, with Norwegian gas flows to the UK slightly lower due to planned maintenance. Additionally, disruptions at LNG facilities in Australia and Indonesia are tightening global supply, prompting European and Asian markets to bid higher for LNG cargoes. Seven LNG vessels are expected to arrive in the UK over the next two weeks, down from ten previously.
UK power prices moved higher, following gas market trends and declining wind generation. The UK Day-Ahead Baseload price rose to £118/MWh, up from £114/MWh, while the Front Month contract climbed to £112/MWh. Lower wind output across Europe has put additional pressure on gas-fired power plants, especially as France and Germany anticipate reduced nuclear availability.
The Baltic states have reached a significant milestone by fully disconnecting their electricity grids from Russia, switching to EU-sourced power instead. This shift strengthens Europe’s energy independence but may have implications for regional grid stability and prices in the near term.
The UK saw a brief increase in renewable generation over the weekend, but wind levels are expected to decline throughout the week, further supporting prices. The UK-France ElecLink interconnector, which was partially reopened on 5 February, is expected to fully resume operations in the coming days, potentially easing supply constraints.
Brent crude oil held steady at $75.20/bbl, as markets assessed the impact of US tariffs on global commodity flows. Carbon prices remained firm, with EUAs at €82.28/tonne, supporting power prices. Coal prices edged lower, with the API2 contract for 2026 at $115.12/tonne, reflecting weaker demand.
With cold temperatures expected to persist and LNG competition intensifying, gas and power prices may remain elevated in the near term. However, forecasts suggest a return to seasonal norms by late February, which could ease pressure on the market.