Notably, Month-Ahead delivery prices observed a rising trend channel (which first formed at the outset of Summer-24) until as recently as late Feb-25 when prices fell out of the bottom, then retested resistance in Mar-25 only to reject to the downside – so, it’s safe to say the bull trend is at an end, and markets are now consolidating within a 30p/therm range, with confirmed support (19th Sep’24/27th Feb’25) at 80p/therm and confirmed resistance at 110p/therm (3rd Mar’25) – please see chart below.
As such, against a backdrop of global recession fears (following Trump’s tariffs), and summer conditions (warm and windy weather), more downside in the short to medium term would seem likely.
All that stands in the way of a welcome bear rally are concerns over storage replenishment over the coming months (in time for the mandated 90% fullness by 1st Nov ’25).
Whilst storage is hovering below the 5-year average (34% versus the 5-year average of 47%), it’s still true to say that levels have started increasing over the last few days with modest injections amid weaker demand off the back of favourable weather.
Nonetheless, we can’t ignore the impacts of the inevitable Norwegian scheduled/unscheduled outages over the coming months (taking pipeline capacities offline).
And so we come back to our reliance on LNG imports – which relies on low Asian demand persisting, the JKM spread encouraging cargoes towards Europe, and the timely introduction of new LNG facilities across Europe.
Across the board, global markets are sliding amid talk of impending global recession, and the associated demand destruction.
Interestingly, talk amongst less mainstream economists is pointing towards the inevitability of the current situation, with some participants suggesting Trump’s protectionism is a deliberate ploy on the part of the American’s to bring about a much needed recession.
By the end of 2026, the US needs to contend with massive refinancing – with nearly $10 trillion dollars of Treasury bonds maturing.
A significant portion of this government debt was issued during the pandemic years when interest rates were on the floor.
Now, of course, interest rates are back up above 4% – the only way to reduce the yield of the looming refinancing is to put the brakes on the economy.
Tariffs (and the inevitable slowing of economic activity) are a sure-fire way to achieve contraction.
So, is Trump’s master plan to lower interest rates in the mid-term, refinance the government debt burden on significantly improved terms (lower interest rates), only thereafter to stimulate the economy with lower interest rates having been achieved?
Time will tell, of course – though watching America’s benchmark 10-Year Treasury bond will be a clear signal.
As bond prices rise, yields fall – right now the 10-year Treasury yield has dropped to 3.882% – the lowest level since Oct ’24.
The yield topped at 4.8% back on 14th Jan ’25 amid hopes that Trump would drive economic activity with tax cuts – which didn’t happen…
Back in the UK, this month’s gas Day-Ahead averages are at 97p/therm (or approx. 3.3p/kwh excluding non-gas).
Down the curve (at the time of writing), ALL live periods of delivery are below 100p/therm for the first time since mid-Apr ’24.
FLEX clients with open volumes are encouraged to consider hedging for periods Winter-25 onwards (given the comparative value on offer).
ELECTRICITY & CARBON
Like all commodities, electricity is on the slide today with investors running for the door.
On the Carbon markets, given the correlation to fossil fuels, EUAs and UKAs are looking heavy – not great news for the institutional investors/speculators who remain net long!
If the slide picks up momentum, stop losses will be wiped out and the bear rally will pick up speed.
Compliance buyers will be eyeing up value at £38/tn at the bottom of the current bearish trend channel ( see chart below).
Today’s UK electricity generation mix is very bearish in nature, with renewables contributing 65%, thermal at 4% (gas and coal) and low carbon at 20% (nuclear and imports).
So far this month, electricity Day-Ahead averages are on target to achieve £73/mwh (or approx. 7.3p/kwh excluding non-energy).
