Energy Market Update – 12 May 2025
Energy prices softened slightly on Friday, closing the week on a bearish note. Downward momentum in gas was driven by high storage levels and stable supply, while muted power demand and robust renewables pressured electricity prices.
European natural gas markets closed lower on Friday, with the TTF front-month contract settling at €34.62/MWh, down from €35.34/MWh, and the UK’s NBP equivalent ending at 82.69p/therm, compared to 84.80p/therm previously. Despite limited demand-side pressure, prices found some support on Monday morning, with the TTF front-month trading flat at €35/MWh. NBP edged slightly higher to 83p/therm. Norwegian flows remained stable, with nominations at 310mcm, slightly lower than Friday’s 315mcm, following the return of assets from maintenance. EU gas storage rose to 42.5% full, up from 41.84%, indicating continued injections despite mild weather reducing heating demand. Market fundamentals remain bearish overall, with ongoing LNG deliveries—two vessels expected in the UK this week—and the announcement of multiple large LNG cargoes headed for North West Europe further strengthening supply-side confidence. Meanwhile, signs of potential diplomatic progress between Russia and Ukraine added to market uncertainty, with in-person talks expected this week. Reports suggest ceasefire proposals are under discussion, and any breakthrough could significantly reshape European supply risks. Additionally, the US and Russia are reportedly engaging in discussions regarding gas transit to Europe, adding a geopolitical layer to the supply outlook.
UK power prices also trended downward on Friday, mirroring the gas market and underpinned by forecasts of high solar radiation and mild temperatures. The UK baseload front-month contract closed at £76/MWh, marginally down from £77/MWh, while the front-season contract also dipped to £85/MWh from £86/MWh. Spot baseload prices dropped more steeply to £79/MWh from £84/MWh. This decline was fuelled by reduced gas-for-power demand as renewable generation remained strong. Wind output is forecast to remain slightly below seasonal norms, but this is offset by higher solar generation across the UK, France, and Germany. Although wind is underperforming, the mild conditions continue to curb electricity demand. No new unplanned outages were reported on Monday morning, and nuclear output remains steady despite ongoing planned outages at Heysham, Torness, and Hartlepool. Overall, the power curve remains reactive to weather trends and broader commodity shifts.
Elsewhere in commodities, Brent crude rose to $64/bbl on Monday from $63/bbl as markets reacted positively to tariff de-escalation between the US and China. Over the weekend, both sides agreed to a temporary reduction in trade levies, providing optimism for improved global economic growth and potential increases in oil demand. Carbon prices remained under slight downward pressure, with EUAs trading at €70/tonne, down from €71/tonne, as weather-led demand reductions continue to affect pricing. Meanwhile, coal prices softened marginally, with the ARA CIF Cal-26 contract settling at $105.23/tonne. In LNG markets, Henry Hub moved up to $3.80/MMBtu from $3.59, supported by increased US gas production, while the JKM price ticked slightly higher to $11.47/MMBtu. However, TTF’s equivalent LNG pricing fell to $11.45/MMBtu from $11.68, highlighting the ongoing disconnect between Asian and European gas price drivers.