Energy Market Update – 19 May 2025
Gas and power prices ended last week with slight declines, amid muted market activity and geopolitical uncertainty. Talks between Russia and Ukraine yielded little progress, and energy traders are now watching today’s high-level trilateral call for signs of a breakthrough.
UK natural gas prices fell modestly on Friday, with the NBP June front-month contract settling at 83.84p/therm, down 0.64p, and the Day-Ahead contract dropping to 80.25p/therm. This came despite early session gains and a forecast indicating an oversupplied UK gas system by 6mcm, driven by demand tracking 23mcm below seasonal norms. Cooler-than-average weather into midweek may temporarily lift residential and commercial heating demand. Norwegian gas flows increased to 302mcm, up from 291mcm, as Langeled pipeline nominations rebounded to 56mcm/day. However, supply risks persist with an unplanned outage at the Kollsnes processing facility and planned maintenance from 21 May expected to reduce Norwegian nominations by up to 170mcm/day. Robust interconnector exports to Europe, reaching 65mcm/day, have helped balance domestic oversupply but limit injection flexibility. Two LNG cargoes are due in the UK this week from Qatar and Algeria, while send-out from South Hook and Isle of Grain terminals remains steady at 13.5mcm/day. EU storage levels continue to rise, now 44.47% full, buoyed by soft Asian demand and redirected cargoes from China.
UK power markets followed gas lower, with Day-Ahead baseload prices down £1.98 to £73.29/MWh and the June front-month dipping to £75.40/MWh. The Winter 2025 contract was steady at £84.32/MWh, reflecting sustained backwardation. CCGT generation fell to 4.4GW, contributing only 18.6% to the mix, while wind and solar collectively exceeded 30%. Interconnectors from France and the Netherlands continued to bolster UK supply. Nuclear generation held steady overall, with some capacity restored at Heysham 1 Unit 2 offsetting extended outages at other sites. Wind output is forecast to decline slightly this week before recovering from 24 May, while solar generation remains strong, particularly in mainland Europe. Continued low French baseload prices are incentivising imports into the UK, helping to cap domestic power prices and dampen gas-for-power demand.
In commodities, Brent crude was stable at $65.41/bbl. The oil market is balancing weaker Chinese refinery output, attributed to sanctions and maintenance, against seasonal driving demand projections. European carbon prices slipped, with EUAs falling €2.42 to €70.99/tCO2 (£59.82/t), and UKAs down to £48.36/tCO2, amid cautious trading and broader economic concerns. The Joint Japan Korea Marker (JKM) for LNG nudged up to $11.90/MMBtu, while European TTF-linked LNG was slightly lower at $11.49/MMBtu. Europe continues to receive robust LNG deliveries, including from Algeria and the US, amid low Asian demand.
Additional developments include Russia formalising its peace negotiation terms, demanding Ukraine’s neutrality and recognition of annexed territories. Brexit-related negotiations are advancing, with a UK–EU agreement expected to enhance trade and energy cooperation. China’s refinery output dropped in April due to internal maintenance and external pressures, curbing near-term crude demand growth. Belgium has reversed its nuclear phase-out, suggesting long-term support for nuclear energy. Europe benefits from weak Asian LNG demand, as surplus Asian cargoes are resold into the continent, accelerating storage builds. High French power exports, bolstered by strong hydro and solar output, continue to suppress UK prices. Finally, today’s scheduled call between the US, Ukrainian, and Russian Presidents comes as Kyiv experiences intensified drone attacks, adding to geopolitical risk and uncertainty.