Energy Market Update - 14 February 2025
Energy markets experienced a sharp decline yesterday, with gas and power prices falling due to geopolitical developments, regulatory discussions in Europe, and profit-taking. The prospect of peace negotiations between the U.S. and Russia, along with discussions on EU gas storage rules, contributed to the bearish sentiment.
UK gas prices dropped significantly, with the NBP front-month contract closing at 124.25p/therm, down 10.74p from the previous session. The TTF front-month contract also fell to €51.38/MWh, reflecting an easing of supply concerns. The downward movement was driven by news that U.S. and Russian leaders have begun discussions on potentially ending the conflict in Ukraine, raising speculation about a possible return of Russian gas exports. Additionally, the EU is reviewing its 90% gas storage target for next winter, which could lead to a relaxation of injection rules, further reducing market anxiety. UK system demand opened 6 mcm undersupplied this morning, but Norwegian flows are stable at 322.5 mcm/day, and LNG deliveries remain steady, with eight cargoes en route to Britain.
UK power prices followed gas downward, with the day-ahead baseload settling at £126.48/MWh, a drop of £3.02. The downward movement was mirrored across European markets, with German power prices also retreating. Higher wind output and stabilised nuclear generation contributed to the bearish trend, as French nuclear output exceeded 50 GW following reactor restarts. The UK power mix remains well-supported by nuclear generation, now near 6 GW. A continued improvement in renewable generation is expected over the coming days, further pressuring prices.
Brent crude edged lower to $75.02/bbl, reflecting broader market uncertainty regarding potential geopolitical shifts. Meanwhile, carbon markets weakened, with EUAs dropping to €78.05/tonne and UK carbon allowances at £46.06/tonne. Coal prices also slipped, with ARA CIF coal at $111.84/tonne. While markets remain cautious, traders are watching for further developments in peace talks and regulatory decisions that could shift the balance of supply and demand.