Markets are thin and rangebound – all in all, there’s not a lot to report this week.
Prices remain balanced, with neither bulls nor bears having the upper hand (please see Seasonal Forwards daily evolution chart below beginning 1st Apr ’25).
Fundamentally, key drivers are overwhelmingly bearish – supply is strong; gas injections are being sustained; and conditions are benign (warm and windy).
And yet, markets remain supported by geopolitical risk across the Middle East, and by the impacts of the war of attrition in Eastern Europe.
Whilst there’s not much in the way of ‘immediate’ doom and gloom for the bulls to get excited about, there’s enough underlying risk to limit any potential downside.
Across Europe, we’re hearing very positive noises as to the likelihood that storage will be replenished in time for the next heating season (Winter-25), with European fullness now at 60% versus the 5-year average of 71%.
The fact that overwhelmingly bearish summer drivers are failing to take the market lower should give buyers pause – have we reached a market bottom?
Can the market go any lower over the next couple of months (before the inevitable winter increases beginning Sep/Oct)?
Surely, if benign conditions persist (and Asian demand remains subdued, and supply remains strong), then market participants will likely have another crack at breaking below April’s lows?
Well, whilst there’s little in the way of risk to take the market higher, there’s also not enough in the way of good news to take the market lower.
That being said, if bears attempt to take the market lower but fail, then buyers would be wise to consider closing out significant winter volumes without any further delay (before winter-bulls take hold of the market).
Monthly Day-Ahead averages for the month so far are holding very steady at 79p/therm (or approx 2.7p/kwh excluding non-gas).
ELECTRICITY & CARBON
Electricity prices are consolidating in a tight range – Seasonal Forwards versus 1-week ago are almost identical (please see chart below).
Winter-25 is at £85/mwh (last printed 30th May) – so down 12% versus the highs of 19th Jun; and up 8% versus the lows of 29th Apr.
On the Carbon side of things, UKAs are increasingly correlated to EUAs (following the “common understanding” reached between the UK/Europe to link emissions markets at the UK-EU summit in London on 19th May).
As such, prices have dropped steeply in line with European/UK gas falls.
At the time of writing, Dec ’25 UKA benchmark prices are at £46.53/tn on the mid-price (a drop of 13% versus 13th Jun) – next meaningful area of support is £44/tn but rumour has it that significant BUY orders are building at £45/tn – so a prudent trade would be a BUY entry at £45.50/tn (so as to not miss the opportunity to get in).
Today’s UK electricity generation mix is bearish in nature reflecting benign ‘summery’ weather conditions, limiting gas-for-power burn – specifically, renewables are contributing 41%, thermal at 15% (gas and coal) and low carbon at 27% (nuclear and imports).
Monthly Day-Ahead averages for the month are falling day-by-day – currently at £72/mwh (or approx 7.2p/kwh excluding non-energy).
