Energy Market Update - 12 February 2025
Energy markets saw mixed movements yesterday, with gas and power prices initially trading higher before a late sell-off pushed contracts lower. Key drivers included a Russian attack on Ukrainian gas infrastructure, colder temperatures across Europe, and reports that the European Commission is considering a temporary gas price cap. Market sentiment remains cautious as traders assess geopolitical risks, storage levels, and upcoming weather forecasts.
UK gas prices moved lower by the end of Tuesday’s session, with the NBP front-month contract settling at 140.57p/therm, down from 141.25p. The TTF front-month contract also declined slightly to €56/MWh, following a late-session dip. Prices were initially supported by colder-than-normal temperatures across Northwest Europe, with forecasts suggesting a continuation of below-seasonal conditions until mid-February. However, a European Commission policy document suggesting a potential temporary gas price cap triggered a sell-off, with some traders opting to take profits on long positions. The proposal has already faced backlash from industry groups, which argue that price interventions could distort the market and discourage investment in gas infrastructure.
European gas storage levels remain under pressure, with 47.89% fullness recorded, reflecting continued withdrawals due to increased heating demand. Norway’s pipeline flows to the continent held steady at 329mcm/day, while UKCS production was slightly lower due to ongoing outages at Teesside CATS, Bacton, and Barrow North. LNG supply into Europe remains robust, with eight cargoes expected to arrive in the UK over the coming weeks, helping to stabilise the supply outlook. However, competition from Asian buyers is increasing, particularly as Japan has entered a joint venture with the US to import LNG from Alaska.
UK power markets saw limited movement on Tuesday, with the front-month baseload contract settling at £114/MWh, down from £116/MWh. The day-ahead baseload contract closed at £127.75/MWh, reflecting a small increase from the previous session. Power prices have been underpinned by low wind generation, which has increased reliance on gas-fired power plants. The latest forecasts indicate a gradual return to seasonal wind levels by the end of February, which could ease pressure on power prices in the coming weeks.
European power markets saw varied movements, with prices in Germany and France rising slightly as gas-fired generation remained a key component of the energy mix. EU carbon prices have remained firm, with EUAs at €82.59/tonne, reflecting continued demand from fossil-fuel-based generation. Meanwhile, nuclear output in France remains stable, ensuring sufficient supply in the region. In the UK, nuclear generation has been impacted by planned outages, including maintenance work at Hartlepool and Heysham plants.
Brent crude oil settled at $77/bbl, up slightly from $75.87/bbl in the previous session. The market was initially supported by concerns over the impact of ongoing US tariff discussions, which could disrupt global trade. However, oil prices saw some retracement in early Wednesday trading following reports of increased US crude stockpiles. Analysts remain divided on the long-term price outlook, with geopolitical tensions providing support while rising inventories weigh on sentiment.
In the carbon market, UK ETS allowances were recorded at £47.65/tonne, down slightly from the previous session. The shift towards higher fossil fuel consumption for power generation has kept carbon prices supported, although ongoing policy discussions in the EU could influence future movements.
BP announced plans to scale back its renewable energy investments, following similar moves by Shell and Equinor. The decision reflects a broader industry trend of prioritising oil and gas assets amid global uncertainties. In coal markets, ARA CIF coal prices for the Cal Y+1 contract settled at $113.87/tonne, indicating steady demand despite the ongoing energy transition towards lower-carbon alternatives.
Markets remain volatile as traders weigh the impact of geopolitical developments, storage levels, and weather forecasts. With European gas inventories sitting below 50% and colder temperatures persisting, demand for heating and gas-fired power generation is expected to remain high. However, LNG arrivals and the potential for milder weather in late February could provide some relief. Meanwhile, regulatory uncertainty surrounding the proposed EU gas price cap is likely to be a key factor influencing trading activity in the near term.