Energy Market Update - 26 February 2025
Energy markets continued their downward trajectory, with natural gas prices declining as warmer weather forecasts and strong LNG arrivals pressured the market. Power prices were relatively stable, though UK contracts remain at a premium to European equivalents, supporting expectations of increased imports.
European gas benchmarks dropped following a revision in temperature forecasts, now expected to average 9°C next week, 1-3°C above normal. Wind generation is forecasted at 11.2GW, 10-20% above seasonal norms, reducing gas-for-power demand. The front-month TTF contract settled at €44.29/MWh, down from €47.14/MWh, while the NBP equivalent closed at 105.98p/therm, down from 112.83p/therm. Market sentiment was also influenced by reports that German industry group BDEW is advocating for a reduction in EU gas storage targets from 90% to 80% by November 1. Additionally, the US is reportedly working on a long-term LNG supply agreement with Ukraine, which could impact European supply dynamics.
UK power prices showed little movement, with the day-ahead baseload price at £103.58/MWh. The Q2 2025 UK contract remains at a premium to European power prices, indicating likely power imports through the coming quarter. Wind generation is forecasted to decline in the short term, potentially supporting prices, but longer-term fundamentals remain bearish with expectations of higher renewable output in March.
In other commodities, Brent crude slipped to $73.02/bbl amid concerns over global demand and weak economic data from the US and Germany. European carbon prices also declined, with EUAs settling at €71.75/tonne. Coal prices followed suit, with the ARA CIF 2026 contract at $104.13/tonne. Meanwhile, Henry Hub gas prices increased to $4.17/MMBtu, while Asian LNG benchmark JKM softened to $13.86/MMBtu.
Markets remain sensitive to geopolitical developments, storage policy discussions, and shifts in energy demand. The upcoming meeting between Presidents Zelenskyy and Trump is being closely watched for any signals on the future of US-Ukraine energy cooperation.