Energy Market Update – 19 June 2025
Energy markets firmed on Wednesday as geopolitical risks in the Middle East escalated and supply-side constraints persisted across Europe. Gains in both gas and power prices were supported by strong demand expectations due to high temperatures, despite an easing in some previous bearish pressures.
Natural gas markets continued to rise with the UK NBP front-month contract climbing to 94.20 p/therm, up 3.00 p/therm from the previous day. This increase was mainly driven by geopolitical tension, with Iranian missile strikes overnight and reports suggesting that the US President has approved plans to attack Iran, albeit without formal authorisation yet. Traders are increasingly concerned about a potential disruption to LNG flows through the Strait of Hormuz, prompting precautionary bullishness. Additionally, Norwegian maintenance and reduced LNG send-out have tightened supply. The UK system opened 9 mcm short, and medium-range storage withdrawals rose to 25 mcm/day to compensate. LNG deliveries to the UK have declined, with nominations from South Hook holding at 5 mcm/day and Isle of Grain at just 2.9 mcm/day. Overall UK demand stood at 135.67 mcm, 13 mcm below seasonal normal, despite temperatures expected to reach 28°C by the end of the week - 8°C above average.
Power prices tracked higher alongside gas, with the UK day-ahead baseload closing at £93.30/MWh, up £5.55 on the previous session. Front-month power was also firmer at £82.50/MWh. Warmer weather forecasts and lower wind output expectations continued to support the prompt market, with solar output anticipated to rise in tandem with the heatwave. Cooling demand is expected to surge into the weekend. Interconnector capacity remained broadly steady, though subdued wind conditions and recent French nuclear issues added bullish sentiment. EDF confirmed corrosion concerns at the Civaux 2 reactor but stated that generation levels would be maintained. However, the French nuclear fleet remains under scrutiny, adding upward pressure to regional power markets. Forward power contracts reflected this, with the UK Q3-25 base rising to £85.68/MWh, up from £83.97 on the prior day.
In commodities, Brent crude prices edged up to $76.70/bbl amid fears that escalating conflict could threaten oil transport routes in the Middle East. While no actual supply disruptions have occurred yet, the market remains sensitive to any developments that could impact exports. In coal, the ARA CIF Cal-26 contract eased slightly to $110.12/tonne, down $0.29, but remains elevated on the week. European carbon markets were little changed, with EUA Dec-25 slipping €0.03 to €74.61/tonne, while UK ETS Dec-25 gained slightly to £53.64/tonne. The modest moves in carbon reflect balanced trading amid weather-driven demand and industrial output uncertainty.