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Market Insight

Datasets reproduced in partnership with

Fri, 21st Feb ’25

GAS

Month-Ahead gas has dropped off more than 20% since the highs of 11th Feb, and price has fallen back into the trend channel which has been in place since mid-2024 (please see chart below).
The lower extremity of the trend channel sits at 105p/therm – let’s see how price reacts with this support level over the coming days/weeks.
A break to the downside would open up a retest of the psychological level of 100p/therm (last seen on 16th Jan).
Contracts dropped again yesterday as comfortable fundamentals continue to exert bearish pressure – with the onset of Summer-25 now only 38 days away.
The strong rise in temperatures above seasonal norms has resulted in significant drop in gas/heating demand in Local Distribution Zones (LDZs) across Europe/the UK.
Gas-for-power demand has been falling thanks to stronger renewables outputs – a condition that looks to be holding steady today.
On the supply side, Norwegian flows were stable yesterday and today’s nominations are unchanged – easing pressure on storage withdrawals.
Prices for delivery down the curve have also dropped off in response to more benign conditions.
The falling markets over the last week (partly in reponse to Trump’s talks with Putin) reflects a perception amongst market participants that it’s only a matter of time before Trump lifts sanctions on Russia (making it likely Russian gas flows will be reintroduced to Europe).
Nonetheless, Dan Jorgensen (the EU’s energy commissioner) reasserted yesterday Europe’s commitment to the complete elimination of Russian gas imports – adding that, to achieve this goal, the European Union will seek more gas and develop renewable energy faster!
It remains to be seen if Mr Jorgensen is protesting too much – given that the US and Russia seem intent on exploring bilateral solutions (exposing Europe’s inertia where Ukraine is concerned).
Indeed, speculations abound that Europe may be forced to execute a humiliating u-turn, and abandon its plan to stop purchasing Russian gas by 2027.
The German Chancellor in waiting, Friedrich Merz, has also stated he sees no immediate return to Russian gas “for the time being”, but he hasn’t ruled it out…
On the weather side, warmer, windier conditions continue to pressure markets amid falling demand.
As such, the UK has seen strong injections back into Rough storage to end the week, prompting rumours of discussions between Centrica and Labour about reintroducing increased Rough storage capacity (the site was decommissioned in 2017 by the Conservatives due to costly maintenance and plentiful imports).
At the time of writing, European storage is at 42% (a bit low, but still within touching distance of the 7-year average at 52%).
Monthly Day-Ahead averages for this month so far have fallen from the highs in the 2nd week of 137p/therm to 129p/therm (or approx. 4.4p/kwh excluding non-gas).

ELECTRICITY & CARBON

As you’d expect, UK electricity is following gas prices downwards.
Bearish price-action is being driven by stronger renewable generation, weaker weather related demand, and softer pricing in the wider energy complex.
The Carbon markets remain closely correlated to fossil fuel prices – so as you’d expect, EUAs and UKAs are on the slide.
Talk of Starmer’s intentions to merge EUAs/UKAs has gone from the headlines, and UKAs have resumed their bearish bias.
Prices (now at £40/tn) have fallen out of the bottom of the long-term bullish trend channel with a new new descending channel having been confirmed (please see chart below).
Today’s UK’s electricity generation mix is very bearish in nature with renewables contributing 57%, thermal at 10% (gas and coal) and low carbon at 22% (nuclear and imports).
Monthly Day-Ahead averages so far for this month have fallen from a high of £119/mwh to £111/mwh (or approx. 11.1p/kwh excluding non-energy).