Energy Market Update - 20 January 2025
Gas and power prices are slightly up today, driven by colder temperatures, lower wind generation, and geopolitical developments impacting energy markets.
Natural gas prices across Europe have remained rangebound this morning. NBP Day-Ahead prices stand at 123.35 p/therm, supported by below-average temperatures and an undersupplied UK system, currently 38mcm short. European gas storage levels are reported at 61% capacity, down from 63.3% last week, as withdrawals rise due to increased demand. Additionally, an unplanned outage at Norway’s Gullfaks field has reduced flows by 6.3mcm/day. Liquefied natural gas (LNG) supplies remain steady, with six cargoes scheduled to arrive in the UK over the next week, despite continued uncertainty in global LNG markets due to weak Asian demand and potential disruptions in the US caused by colder weather.
Power prices have surged on reduced wind generation and low renewable output across Europe. UK Day-Ahead baseload power prices rose sharply to £107.27/MWh, reflecting low wind output, which is expected to remain below seasonal averages until later this week. In Germany, Day-Ahead baseload is trading at a significant premium, €60/MWh above the February contract. French nuclear availability remains high, averaging 53.9GW this month, which has helped moderate prices slightly. The UK’s reliance on gas-fired generation has increased due to weak wind and cloudy conditions, adding further support to prices.
Geopolitical developments continue to influence the market. The ceasefire between Israel and Hamas, implemented yesterday, has reduced some of the geopolitical risk premium in Middle Eastern energy markets. Donald Trump’s inauguration today is also drawing attention, as his administration has pledged to increase oil and gas supply by reducing regulations, which could impact global market sentiment in the coming weeks. Brent crude remains steady at $80.79/bbl, with traders awaiting clarity on potential policy changes.
Looking ahead, mixed weather forecasts suggest colder conditions may persist intermittently into February, maintaining demand for heating. However, LNG imports and stable nuclear output may offer some relief to European markets. Spot gas and power prices are expected to remain sensitive to weather-driven demand and geopolitical developments.