Energy Market Update - 17 February 2025
Energy markets opened lower today, with gas and power prices falling amid milder weather forecasts, strong LNG arrivals, and easing storage concerns. The potential for Ukraine to join peace talks has also contributed to bearish sentiment.
UK and European gas prices declined as strong LNG imports and milder weather forecasts continued to ease supply concerns. The UK is set to receive 11 LNG cargoes in the coming weeks, while European storage levels remain at healthy levels for this time of year. Discussions within the EU about relaxing aggressive storage refill targets for the summer have further contributed to the downward pressure on prices. Additionally, Norwegian gas flows have remained stable, with no major unplanned outages reported.
However, geopolitical tensions continue to influence the market. Talks of potential peace negotiations between Russia and Ukraine have brought a degree of optimism to energy markets. Reports indicate that discussions may include a broader agreement between Russia and the US, though uncertainty remains over Ukraine’s role in the talks. The potential for reduced military escalation has softened risk premiums in gas markets. Meanwhile, in the US, colder weather in Texas is expected to impact LNG feed gas levels, potentially reducing export volumes in the short term.
UK power prices mirrored gas market movements, with front-month baseload prices falling as a result of strong renewable generation and lower demand expectations. The UK’s reliance on interconnectors could face short-term disruptions as the IFA1 UK-France interconnector is scheduled for maintenance, reducing available transmission capacity. However, French nuclear output remains robust, ensuring France’s role as a net exporter of electricity to Britain.
In Europe, power prices have been pressured by lower gas prices and stable carbon market conditions. Despite concerns over supply security earlier in the winter, confidence has improved, with governments considering adjustments to energy storage policies.
Oil prices edged lower as markets assessed the potential impact of geopolitical negotiations on energy supply chains. Brent crude slipped slightly, reflecting cautious optimism that diplomatic efforts could ease tensions. However, uncertainty remains over how any agreement between the US and Russia might affect global energy markets.
Carbon markets showed slight gains, with European carbon allowances firming as investors monitored regulatory developments. US gas prices increased marginally, while Asian LNG prices remained steady amid muted demand.
Overall, the market is navigating a complex mix of geopolitical developments, supply conditions, and shifting demand patterns. The outlook remains bearish in the short term, though ongoing geopolitical uncertainty could lead to volatility.