Energy Market Monthly Overview - January 2025
January 2025 saw significant shifts in energy market dynamics, with early-month price declines giving way to increased volatility in the latter half due to supply constraints, colder weather, and geopolitical uncertainty. Gas and power markets initially softened as mild temperatures, steady LNG arrivals, and strong European storage levels alleviated concerns over winter supply. However, a reversal in weather patterns, supply-side disruptions, and external market influences drove prices sharply higher towards the end of the month.
Gas Market Developments
In the first half of January, natural gas prices trended lower as above-seasonal temperatures across Europe reduced heating demand. High LNG inflows, particularly from the United States, ensured a well-supplied market, with over 100 cargoes arriving by the end of the month. Norwegian exports remained stable at an average of 336mcm/day, despite periodic maintenance issues. European gas storage levels held above 69% capacity at the start of the year, providing a crucial buffer against unexpected supply disruptions.
The second half of the month saw a sharp shift in sentiment. A drop in temperatures, coupled with weaker wind output, led to increased reliance on gas-fired power generation. Supply constraints, including Norwegian curtailments at Asgard, Troll, and Gullfaks, resulted in a price surge, with NBP reaching 131p/therm and TTF breaking through €52/MWh by the final days of January. Geopolitical factors also played a role in market volatility, as policy shifts under the new US administration and continued uncertainty surrounding Russian pipeline flows added further uncertainty. By the end of the month, European gas storage had fallen to 55%, raising concerns about refill strategies ahead of the next winter season.
Power Market Trends
Power markets followed a similar trajectory, initially experiencing declining prices before rebounding in the latter half of the month. In the UK, day-ahead power prices fell below £90/MWh early in January, supported by strong renewable generation and mild weather conditions. As colder temperatures set in, power prices rose sharply, reaching £130.70/MWh in the UK and €141.02/MWh in Germany. Wind generation remained volatile throughout the month, with periods of low output increasing the reliance on gas-fired electricity production.
In France, nuclear availability remained stable, averaging between 53 and 56GW, which helped to moderate price increases in parts of Europe. Carbon markets also experienced steady growth, with EUA prices reaching €80/tonne as discussions progressed regarding the potential linkage between the UK and EU emissions trading schemes.
LNG and Storage Outlook
LNG played a critical role in stabilising the market throughout the month. Strong exports from the US helped offset reductions in Russian pipeline flows, while continued arrivals into European terminals maintained confidence in supply security. However, weather-related disruptions at Freeport LNG and extreme conditions across North America caused periodic market uncertainty. With European gas storage falling to 55% by the end of January, attention is now shifting to summer refill strategies. Germany’s introduction of a gas storage subsidy programme may influence market dynamics, particularly regarding seasonal price spreads and procurement behaviour.
Key Market Drivers for February 2025
The outlook for February will largely depend on weather patterns, LNG supply, storage dynamics, and geopolitical developments. Cold temperatures could sustain elevated demand, although improving wind generation may ease pressure on power prices. LNG availability will remain a key factor, with continued US exports playing a crucial role in balancing the market, though rising Asian demand may present competitive pressure for available cargoes. Rapid storage withdrawals in January have underscored the need for strategic replenishment ahead of next winter. Additionally, geopolitical risks remain a focal point, with policy shifts under the new US administration, tensions in Eastern Europe, and the potential for additional sanctions on Russian gas continuing to influence market sentiment.
Conclusion
January 2025 demonstrated the ongoing sensitivity of energy markets to shifts in weather, supply constraints, and external geopolitical factors. While the month began with relatively stable and bearish conditions, tightening fundamentals and external risks contributed to a late-month surge in prices. As February begins, market participants will need to closely monitor demand fluctuations, LNG flows, storage trends, and broader geopolitical developments. A measured approach to procurement and risk management will be essential to navigate continued market volatility.