Energy Market Update – 20 June 2025
Energy markets surged on Thursday, with natural gas prices hitting multi-month highs driven by escalating Middle East tensions. Power prices followed gas movements, while oil rose and carbon fell.
Natural gas markets experienced a significant upswing, with UK NBP and Dutch TTF day-ahead contracts gaining around 7–8% day-on-day. The NBP day-ahead closed at 98.00p/therm, about 15% above the June average. These gains came despite an increase in Norwegian gas flows, as market attention focused on rising geopolitical tensions between Iran and Israel. Traders weighed the potential for US military involvement, which has raised concerns over supply security through the Strait of Hormuz. As a result, risk premiums have become embedded across the energy complex. The UK saw weaker Langeled pipeline imports, with daily flows into Easington falling by more than half compared to the same time last year. Norwegian exports are being redirected towards continental Europe, driven by firm cooling demand and sluggish storage injections. While gas system demand in the UK dropped to 127.44 mcm/day, lower LNG sendout and modest interconnector imports offered limited relief. Overall, the outlook remains volatile, with geopolitical risk and weather fundamentals both in sharp focus.
Electricity prices followed the gas rally, with UK baseload contracts rising across the curve. The day-ahead UK power contract settled at £90.28/MWh, though this marked a retreat from the previous session’s £93.30/MWh. July and August baseload offers were up slightly, trading at £84.50/MWh and £85.35/MWh respectively. Q3-25 power was up by £1.20 to £88.00/MWh. The short-term increase in power prices was supported by a sharp fall in wind generation midweek, which dropped to 3.2GW on Thursday—just over 10% of the generation mix. This shortfall was offset by an uptick in gas-fired generation, which reached 8.6GW (29.3%). Imports from France, Denmark, and Norway also increased to 5.6GW, aided by strong cooling-related demand across the continent. Looking ahead, weather forecasts show a shift from recent above-average temperatures to a cooler pattern starting Monday, which is expected to suppress gas-for-power demand. Wind generation is forecast to rise again, which could ease near-term price pressures if realised.
Other commodity markets reflected the same geopolitical anxieties. Brent crude rose by $2.15 to $78.85/bbl, underpinned by the potential for military escalation in the Middle East and its implications for oil transit routes. Coal prices climbed as well, with the ARA CIF Cal-26 contract up to $112.12/tonne. However, European carbon prices softened, with EUA Dec-25 falling by €1.87 to €72.74/tonne and the UK ETS contract dropping nearly £2 to £51.67/tonne. The decline in carbon was linked to expectations of lower industrial output and the short-term increase in renewables, although these trends could reverse depending on supply stability and political developments. The broader commodity complex remains on edge, with uncertainty over the White House’s decision on Iran likely to continue weighing on trader sentiment over the coming weeks.