Energy Market Update - 14 March 2025
Energy markets remained relatively stable for most of the session before a sharp sell-off in the final hour of trading, triggered by comments from President Putin regarding the proposed ceasefire in Ukraine. His statement that Russia was open to a peace agreement but required conditions, including securing Russian-occupied land and preventing NATO expansion, created uncertainty. He also referenced potential US-Russian cooperation on energy, specifically mentioning a “pipe to Europe,” widely believed to be a reference to Nord Stream 2. While no immediate policy changes have been made, the mere mention of these topics had an instant impact on European gas markets, with prices declining sharply towards the close.
European natural gas markets saw an initial uptick in prices early in the session as colder-than-average temperatures drove up heating demand. EU gas storage withdrawals increased to meet the additional consumption, with overall storage levels reported at 35.89%, a significant shortfall compared to 60.07% at this time last year. The UK gas system opened long this morning, with total demand at 286 mcm, which is 25 mcm above seasonal norms. Norwegian flows remained stable at 332 mcm/day after the conclusion of unplanned maintenance at the Åsgard field, which had constrained supply earlier in the week.
For most of the day, gas prices on the near-curve remained firm, reflecting tight fundamentals and limited expectations of Russian pipeline gas returning to Europe in the short term. However, Putin’s late-afternoon comments about potential US-Russian energy collaboration caused an immediate drop in prices. The TTF front-month contract settled at €42.08/MWh, down from €42.25, while the UK NBP front-month contract closed at 102.99p/therm, declining from 104.19p. This morning, gas markets continued to weaken, with the TTF front-month contract trading at €41/MWh.
The UK system remains well-supplied, supported by strong Norwegian flows and LNG send-out, with 11 LNG cargoes scheduled to arrive in the UK over the next two weeks. The step-up in storage withdrawals across Europe signals higher demand for gas replenishment in the coming months, particularly as the continent remains below targeted storage levels ahead of next winter.
UK power markets followed the movements in the gas market, with prices easing on the back of weaker gas prices and a relatively stable supply-demand balance. The UK baseload front-month contract settled at £84/MWh, down from £85, while the front-season contract rose slightly to £83/MWh from £81. Power demand remained elevated due to colder weather, while low wind generation increased reliance on gas-fired generation. Combined Cycle Gas Turbine (CCGT) demand was recorded at 62 mcm, reflecting the lower wind output.
The UK carbon market provided some additional support to power prices, with reports indicating that discussions on linking the UK and EU Emissions Trading Schemes (ETS) were still ongoing. The EUA December 2025 contract closed at €70.60, up from €69.62.
Interconnector flows between the UK and continental Europe remained relatively stable, though limited capacity on key links has constrained imports. Power fundamentals are expected to remain tight in the near term due to ongoing nuclear outages and intermittent renewable generation.
Brent crude saw slight losses, closing at $69.88/bbl, down from $70.95. The decline was attributed to market uncertainty over Putin’s comments and the potential for a ceasefire agreement, which could influence global energy markets. The Trump administration also introduced further restrictions on Russia’s oil, gas, and banking sectors, limiting Russian access to US financial systems, which added to the bearish sentiment in crude markets.
Coal prices edged lower, with the ARA CIF Cal-26 contract settling at $103.37/tonne, down from $104.34. Despite steady coal demand, downward pressure came from weak industrial output forecasts in Europe and continued policy shifts towards cleaner energy sources.
Carbon prices saw some upward movement, with EUA December 2025 contracts rising to €70.60 from €69.62. This was driven by ongoing discussions around European climate policy and the potential for adjustments in emissions targets.
Meanwhile, LNG prices in Asia and Europe showed mixed movements. The JKM benchmark was assessed at $13.37/MMBtu, while the TTF equivalent stood at $13.42/MMBtu. Robust LNG supply into Europe has kept prices in check, with regasification levels topping 100 mcm/day in France. The UK is expected to receive steady LNG arrivals, with strong flows from both US and Russian sources.