Energy Market Update – 04 June 2025
UK gas and power prices rose again as Norwegian supply constraints and weak UK gas storage levels continued to drive bullish sentiment. Carbon market gains and steady oil prices added to the upside pressure.
Natural gas prices moved higher across the UK and European markets, primarily driven by ongoing maintenance on the Norwegian Continental Shelf and persistently weak storage levels in Britain. The UK NBP front-month contract increased to 85.30p/therm, with the TTF equivalent at €36.41/MWh. Despite reduced flows from key fields such as Troll and Kollsnes, UK system supply remained slightly long due to below-average demand, aided by strong wind generation. However, the outlook remains tight with UK storage levels reportedly 50% below last year’s levels, severely limiting flexibility in the event of supply disruptions. Moreover, LNG arrivals are sparse, with only a single cargo currently scheduled for June, while strong Asian demand competes for supply. EU-wide storage reached 49.2%, closely tracking 2022 levels, though German and Dutch storage remain lagging at 41.26% and 36.92% respectively. On the geopolitical front, tensions persist following Ukrainian strikes on Russian airfields, and while Istanbul talks did not produce a ceasefire, limited progress such as a prisoner exchange hints at potential diplomatic openings. Meanwhile, the dollar’s modest strengthening (GBP/USD at 1.3536) is likely adding marginal upward cost pressure on dollar-denominated energy imports.
UK power prices mirrored the gas market’s strength, with front-month baseload contracts rising to £75.30/MWh. The broader Q3 and Winter 2025 contracts climbed to £77.07/MWh and £85.37/MWh respectively. Strong wind output this week helped cap demand and offset some price volatility, though forecasts suggest wind generation will decline next week, tightening system margins just as temperatures recover to seasonal norms across Northwest Europe. The UK power mix has benefited from healthy wind levels recently, but a dip next week could increase reliance on gas-fired generation. Interconnector flows remain variable, with weak inflows from Belgium and the Netherlands noted. In Europe, German front-month baseload stood at €79.54/MWh and French at €40.41/MWh. While carbon prices offered moderate support, power pricing remains heavily influenced by gas dynamics, especially given the supply-side risks from Norwegian fields and LNG uncertainty. EUA carbon prices (Dec-26 delivery) rose by 1.13% to €74.44/tonne, reflecting increased fossil fuel usage and reinforcing the upward trajectory for power contracts.
In broader commodity markets, Brent crude rose by 2.4% to $65.63/bbl following an increase in US rig counts, which markets interpreted as a signal of potential tighter supply. However, gains remain capped as OPEC+ continues to consider increasing output, and uncertainty around global demand persists amid geopolitical instability. WTI crude followed a similar path, settling at $63.41/bbl. Meanwhile, coal prices edged lower, with the ARA CIF Cal-26 benchmark down 2.91% to $102.75/tonne. The easing in coal suggests weaker industrial demand or growing confidence in alternative fuel supply, though this remains subject to volatility depending on weather and regional generation trends. Carbon markets firmed slightly, with all major EUA contracts showing mild daily gains, supporting the cost base for power generators relying on fossil fuels. Currency movements were modest, with EUR/GBP at 0.8436 and GBP/USD at 1.3536, offering minimal impact but continuing to influence import pricing for commodities.