Energy Market Update: Weekly Wholesale Gas and Power Trends (3rd February 2025)
- Lee Guttridge
- Feb 8, 2025
- 3 min read
This week’s Energy Market Update explores the latest trends in the UK wholesale gas and power markets, influenced by shifting global dynamics, government policies, and seasonal factors. Here’s a breakdown of the key market drivers and their potential impact on businesses.
Wholesale Gas Market – Energy Market Update
The UK gas market is experiencing a combination of bearish and bullish factors.
Bearish Trends:
Increased LNG Supply: The UK continues to attract high LNG inflows due to weak Asian demand and stable global production levels. February imports are expected to rise by 15% year-on-year, helping stabilise supply.
EU Sanctions Exemption: The EU has decided not to include Russian LNG in its latest sanction package, prioritising supply security. Additionally, the EU’s decision to remove the energy crisis price cap suggests that Europe’s worst energy shortages are now behind it.
Bullish Trends:
Trade Tariff Uncertainty: New tariffs imposed by the US on Mexico, China, and Canada—with potential extensions to the EU—are causing market uncertainty around supply chain disruptions, rising costs, and possible retaliatory trade measures.
Storage Concerns: The EU, UK, and Ukraine continue to face gas storage concerns, worsened by the La Niña weather phenomenon, which is bringing low temperatures and weak wind generation, increasing reliance on gas reserves.
Wholesale Power Market Update
The UK power market also reflects a mix of bearish and bullish signals:
Bearish Trends:
Norwegian Hydro Surplus: Norway is experiencing high hydroelectric output, with surpluses expected to double in February, helping to suppress UK electricity prices through increased power exports.
UK-EU Carbon Market Linkage: Plans to link the UK and EU Emissions Trading Systems (ETS) could help reduce costs for UK energy producers by enabling them to access EU markets more freely. This could also incentivise further renewable energy development, offsetting some upward price pressure.
Bullish Trends:
Carbon Costs Rising: The UK government’s plan to align its ETS with the more expensive EU ETS scheme is expected to increase power prices, as businesses will face higher carbon costs.
Norwegian Fixed Price Policy: Norway’s new fixed-price power policy, set to take effect in October 2025, could create wholesale market volatility. The policy may reduce incentives to conserve power when prices are high, potentially leading to higher overall consumption and price fluctuations.
What This Energy Market Update Means for UK Businesses
With LNG supply remaining strong and European energy crisis measures being eased, gas prices could stabilise in the short term. However, concerns around gas storage levels and geopolitical trade uncertainties could lead to volatility later in the year.
In the power market, Norwegian hydro exports and carbon market integration may help keep prices in check, but rising ETS costs and policy changes could create long-term upward price pressures. Businesses should consider strategic procurement planning to navigate potential cost increases effectively.
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