Energy Market Update - 15 January 2025
European gas and power prices eased yesterday after strong gains earlier this week, driven by improving weather forecasts, increased wind generation, and easing geopolitical tensions.
UK gas prices fell yesterday, with NBP day-ahead gas closing at 120.30p/therm, as milder weather forecasts and higher wind output reduced demand. The extended outage at Azerbaijan’s Shah Deniz field, now expected to last until 19 January with a capacity impact of 8.5mcm/day, weighed on supply. Norwegian flows also dipped to 324mcm/day due to maintenance at the Njord field, further supporting prices. Despite these supply challenges, milder temperatures above seasonal norms and eight LNG cargoes expected to reach the UK in the coming weeks are adding downward pressure on prices.
UK power prices softened in line with gas markets, although day-ahead baseload power increased to £131.83/MWh due to reduced wind generation. Wind speeds are forecast to rise slightly in the coming days, helping renewable output recover. Meanwhile, gas-fired generation remains critical, with demand at 84mcm/day. Continental power markets also saw easing prices, with German and Dutch baseload contracts retreating after sharp gains earlier this week. France’s power prices remained elevated due to colder-than-average weather, sustaining demand.
Geopolitical tensions remain a key market driver. NATO has announced deployments in the Baltic Sea to safeguard infrastructure after recent undersea cable incidents. Meanwhile, discussions around potential resumed Russian gas flows through Ukraine continue, though no resolution has been reached. The impact of US sanctions on Russian energy assets is also being felt, particularly in LNG markets, where European buyers are looking to diversify supplies.
This morning, prices have regained some ground, supported by unplanned outages at Norwegian facilities and strong demand for gas-fired power. However, the longer-term outlook remains more stable, with February temperatures expected to stay above seasonal averages, which may allow for storage replenishment. Medium-range storage in the UK is currently at 40%. A total of eight LNG cargoes en route to the UK could help balance the system and limit significant price increases. Brent crude oil is trading slightly lower at $79.92/bbl, while EUA carbon allowances remain steady at €76.96/tonne.