Energy Market Update – 20 May 2025
European energy markets opened the week with limited movement, as geopolitical tensions and supply disruptions continue to create uncertainty. Key attention remains on faltering Ukraine-Russia peace efforts and upcoming Norwegian maintenance outages.
Natural gas markets saw a mixed start to the week. While the UK Day-Ahead price slipped to 82p/therm, the front-month contract held steady at 84.29p/therm, and Winter 2025 climbed to 94.23p/therm. The market remains sensitive to Norwegian gas supply reliability, which has been affected by both unplanned and planned outages. A recent outage at Kollsnes removed 18.5mcm/day, cutting Norwegian nominations below 300mcm/day. This disruption precedes major scheduled maintenance starting 21 May, expected to peak at 174mcm/day of offline capacity. Demand-side factors, including cooler-than-usual weather, are likely to increase pressure on system injections and interconnector flows. UK LNG send-out remains minimal, with just one cargo expected in the next fortnight and daily regasification stuck at 13.5mcm/day. EU gas storage recovery has been sluggish, reaching only 44.75%, trailing behind last year’s levels, which raises concerns over summer supply adequacy.
UK power markets echoed the gas trend, with Day-Ahead baseload falling to £84/MWh while June and July contracts rose to £76 and £76.70 respectively. Winter 2025 gained traction, reaching £85.47/MWh. Rising UK carbon prices and supply concerns due to approaching Norwegian maintenance contributed to strength along the curve. System fundamentals have provided moderate support, aided by strong wind generation at the start of the week. However, renewable output is expected to drop below seasonal norms later in the week. UK nuclear output remains stable, even as maintenance continues at key sites such as Heysham and Hartlepool. Cross-border electricity imports from France and the Netherlands remain robust, helping balance the grid amid reduced LNG availability. A significant development in the carbon markets also bolstered power pricing, as UK Allowances surged more than 8% following news of possible UK-EU emissions trading system alignment.
In other commodities, Brent crude rose to $65.54/bbl, supported by a weaker US dollar and speculation that sanctions relief for Venezuela could be delayed. However, the market remains cautious, with the forward curve approaching contango. LNG benchmarks edged higher, with JKM at $11.97/MMBtu and TTF-linked spot LNG at $11.63/MMBtu, whereas Henry Hub fell to $2.96/MMBtu due to strong inventory builds and subdued weather-driven demand. Carbon pricing diverged across Europe. UK Allowances climbed to £52.43/t, reacting positively to regulatory talks with the EU, while EUAs slipped slightly to €70.42/t. The narrowing spread between UKA and EUA reflects rising expectations of a harmonised carbon market. Elsewhere, hydropower output in the Alpine region is under pressure due to forecasts of dry conditions, which could boost thermal generation demand across parts of central and southern Europe.