Energy Market Update - 27 January 2025
European gas and power markets opened lower today, driven by reduced demand from mild weather, strong wind generation, and stable LNG flows despite some recent disruptions.
The UK’s NBP front-month gas contract is trading at 121.00 p/therm, down 3.50 p/therm from the previous session, while the TTF front month is priced at €48.35/MWh, a decrease of €1.30/MWh. Both contracts are responding to reduced demand caused by warmer-than-average weather. EU gas storage levels remain a key support factor, now at 56% capacity, with the S25/W25 seasonal spread widening due to summer injection disincentives following last week’s subsidy proposals. Notably, the Dutch government has directed EBN to fill the Bergermeer site to enhance supply security.
LNG flows to Europe are steady, although UK send-out has dropped today, partially due to storm-related delays in unloading. Meanwhile, Norwegian flows are stable at 330 mcm/day despite an unplanned outage at Troll, which has reduced output by 10.6 mcm/day. The UK system opened 20 mcm/day short this morning, with ongoing maintenance at the IUK interconnector limiting imports. Cooler weather is forecast for early February, which may further impact demand.
European power markets have seen significant drops in day-ahead prices, with German baseload contracts at €104.00/MWh, down nearly 10% from the previous session. This is largely attributed to strong wind output and mild weather. Storm Eowyn, which brought severe winds to the UK over the weekend, is boosting wind generation across Northern Europe, with France seeing exceptionally high output. However, nuclear availability in France remains constrained, with temporary outages reducing capacity by 3.1 GW over the weekend.
The UK power market is similarly bearish in the prompt, with UK spot baseload at £93/MWh, reflecting robust renewable output and reduced gas demand. Forward contracts, however, show moderate gains, with the UK February Baseload contract rising to £107/MWh, up from £103/MWh, tracking gas market sentiment. Ongoing interconnector outages, including ElecLink (1 GW) and reduced capacity from Denmark, may add upward pressure in the coming weeks.
In geopolitical developments, Sweden has seized a vessel following damage to a data cable connecting it to Latvia. This incident follows recent infrastructure concerns in the Baltics, including the Christmas damage to the Estlink 2. Such events continue to highlight security risks to energy infrastructure in the region.
Carbon markets remain strong, with EUAs trading at €81.67/tonne, supported by rising gas demand and reduced coal usage. Brent crude fell slightly to $78.50/bbl over the weekend, influenced by geopolitical developments, including Colombia’s shift on US deportation flights under pressure from President Trump. LNG markets remain tense after Indonesia announced potential cargo delays, raising concerns about European supply resilience.