Energy Market Update - 27 February 2025
Energy markets continued to decline, with gas and power prices moving lower as traders reacted to changing geopolitical developments and regulatory shifts. The EU’s consideration of more flexible gas storage refilling targets, ongoing peace discussions regarding Ukraine, and strong LNG supply have been key drivers of the bearish momentum.
European gas prices experienced another day of losses as market participants positioned themselves around reports that the European Commission is reviewing gas storage refilling targets. While the 90% storage target by 1st November remains unchanged, there are discussions around a more flexible trajectory for refilling, aimed at reducing market disruptions. This move comes after months of price increases driven by aggressive storage replenishment targets. The market has reacted by shedding risk premiums, contributing to the continued downward movement in prices.
The UK’s NBP front-month contract settled at 98.78p/therm, down from 105.98p/therm, while the Dutch TTF front-month contract closed at €41.34/MWh, falling from €44.29/MWh. These declines bring gas prices to their lowest levels since early November, reflecting a 40p/therm drop from highs seen earlier this month.
Norwegian pipeline flows into the UK remained stable at 328 mcm/day, although Skarv continues to experience an unplanned outage, scheduled to last until 1st March. Meanwhile, LNG supply remains strong, with 13 vessels set to arrive in the UK over the next couple of weeks, up from 12 vessels in the previous forecast. Across Northwest Europe, LNG imports are expected to total 985 mcm by the end of the month, reinforcing strong supply conditions. Despite high LNG availability, the UK gas system opened the day with a 14 mcm shortfall, as supply constraints from LNG terminals led to a temporary imbalance.
Amid these factors, gas contracts opened slightly higher this morning, with TTF front-month trading at €42/MWh, up €1 from the previous settlement. Some traders attribute this move to a technical rebound following sharp declines in recent sessions.
UK power prices continued to track gas price movements, with the front-month baseload contract settling at £87/MWh, down from £89/MWh, and the front-season contract at £79/MWh, down from £85/MWh. Spot baseload power fell to £97/MWh, from £103/MWh the previous day. The downward pressure on prices has been driven by both weaker gas prices and forecasts of increased wind generation.
Wind output is expected to rise in the coming days, helping to offset the impact of reduced nuclear availability. Several UK nuclear reactors remain offline for planned and unplanned maintenance, including Hartlepool and Heysham units. These outages have contributed to a tighter power supply picture in recent weeks, but the impact has been muted by strong renewable generation and mild weather conditions.
In mainland Europe, power prices were mixed. The French market saw gains due to below-seasonal temperatures and lower renewable generation, while German and Dutch power prices declined amid mild weather and strong LNG supply. Germany’s long-term energy strategy remains under discussion, with new gas-fired power plants unlikely to come online before 2031. This could delay the country’s transition away from coal-fired power generation, which still accounts for a significant share of its electricity mix when wind output is low.
Brent crude prices remained steady, trading at $73.00/bbl, as markets absorbed the implications of a recently finalized rare earths agreement between the US and Ukraine. This deal could have significant implications for global energy trade, with reports suggesting that security guarantees may be part of broader discussions aimed at advancing peace talks with Russia.
Coal prices edged lower, with the 2026 contract trading at $102.53/tonne, down from previous levels. Carbon markets also weakened, with EU Allowances (EUAs) settling at €71.02/tonne, compared to €72.00/tonne the day before. In the US, Henry Hub natural gas prices fell to $3.96/MMBtu, down from $4.17/MMBtu, reflecting strong domestic supply. Meanwhile, Asian LNG prices also declined, with JKM trading at $13.49/MMBtu, down from $13.86/MMBtu, while the TTF equivalent stood at $12.74/MMBtu, falling from $13.62/MMBtu.
The market remains highly reactive to ongoing geopolitical developments, particularly regarding energy policy shifts in Europe and diplomatic efforts related to Ukraine. The combination of high LNG availability, easing regulatory concerns, and potential geopolitical shifts continues to shape the outlook for energy prices in the coming weeks.