Energy Market Update - 28 January 2025
UK and European gas and power prices have rebounded slightly this morning after a weaker close in yesterday’s session. Gas prices were lifted by colder weather forecasts and storage withdrawals, while UK power gained as wind generation is expected to dip.
Gas markets opened higher today, with the NBP front month contract trading around 121.00p/th, up 0.75p/th from the previous session, and TTF front month rising 0.45€/MWh. Despite the short-term gains, overall conditions remain mixed. While colder weather is expected to return later in the week, much of Europe remains milder than seasonal norms, with France around 4°C above average and Germany 7°C above. The UK system is currently 3mcm long, with demand at 254mcm—49mcm below normal. LNG send-out remains lower than expected at 45mcm due to storm-related delays in cargo unloading, while Norwegian imports remain stable at full capacity. European gas storage stands at 56% full, with strong withdrawals ongoing as colder weather and lower wind generation increase demand. However, long-term concerns persist over Europe’s ability to meet its mandated 90% storage target by November.
In power markets, UK baseload front-month contracts opened higher at £106.00/MWh, up £2.85/MWh, while German front-month baseload rose by over 2.00€/MWh to 112.55€/MWh. Power markets have been influenced by discussions on linking the UK and EU emissions trading schemes, which could drive price convergence. Spot power prices remained supported by strong wind generation at the start of the week, but forecasts indicate a decline from 30 January to 3 February, potentially increasing gas-for-power demand. The BritNed interconnector, linking the UK and the Netherlands, is expected to return to service today after maintenance, which could impact power imports and exports.
Geopolitical factors continue to influence market sentiment. Ukrainian President Zelensky has signalled willingness to allow Azeri gas transit through Ukraine to support European supply, though a renewal of Russian gas transit agreements remains firmly off the table. Hungary has threatened to veto EU sanctions unless Russian gas supplies continue, adding uncertainty to future energy flows. Meanwhile, the European Commission has announced emergency measures to support Moldova’s energy needs, which were disrupted due to the loss of Russian gas. Additionally, continued delays to LNG arrivals due to stormy weather in the UK have tempered some of the bearish pressure seen in European gas prices.
Prices remain rangebound as the market weighs near-term weather and supply disruptions against longer-term concerns over storage and geopolitical risks. Brent crude is trading at $77.08/bbl, EU carbon prices have risen to €79.36/tonne, and UK power and gas contracts remain sensitive to shifting weather forecasts and broader energy policy developments.