Energy Market Update - 21 March 2025
Energy markets experienced a relatively quiet session yesterday, with prices softening towards the end of the day. However, overnight reports of a strike on the Sudzha gas pumping station in western Russia have introduced fresh uncertainty, with initial reports suggesting a Ukrainian drone strike. If confirmed, this would mark a significant escalation and could impact negotiations over a ceasefire agreement. Markets are likely to react cautiously to this development, with volatility expected.
European gas prices saw minor declines in Thursday’s session, with the TTF Front Month contract settling at €42.86/MWh, down from €43.36, and the NBP Front Month closing at 104.33p/therm, from 106.20p. Despite this, early trading on Friday saw a reversal, with the TTF Front Month opening at €45/MWh, up €2, as markets responded to the Sudzha news. Slovakia’s sanction waiver extension for Russian gas payments until May provided some stability, while ongoing LNG trade tensions between the US and China weighed on sentiment. Norwegian gas flows were lower, with Asgard and Troll outages reducing nominations to 319mcm, down from 325mcm. EU gas storage levels declined slightly to 34.02% full, and the UK is expecting six LNG cargoes over the next two weeks, down from eight.
UK power markets softened in line with gas prices. The UK Front Month Baseload contract fell slightly to £91/MWh, from £92, while the Front Season contract declined to £85/MWh from £88. However, a sharp drop in the UK Base Day-Ahead contract saw prices fall to £67/MWh, from £98, as wind generation picked up significantly. This increase in renewable output offset some of the bullish impact from the gas market. UK spark spreads for the front week and front month strengthened, reflecting improved confidence in short-term generation forecasts.
Brent crude rose to $72/bbl, up from $71, amid renewed concerns over global supply disruptions, while EU carbon prices remained unchanged at €73/t. The Henry Hub gas benchmark weakened to $3.98/MMBtu from $4.25, while JKM LNG prices slipped to $13.53/MMBtu from $13.76. The coal market saw further declines, with the ARA CIF contract for 2026 settling at $102.30/tonne, down from $103.42.
This morning’s market sentiment remains focused on the potential fallout from the Sudzha strike, with geopolitical uncertainty driving risk premiums in energy markets. Any confirmation of damage to the station could lead to further volatility in gas and power contracts.