Energy Market Update - January 14 2025
Markets kick off 2025 with considerable increases
Welcome to 2025 where the positive outlook on the energy markets in the run up to Christmas has been undone at the beginning of the New Year.
The first full week of January has seen the markets drop off, but prices are still higher than the pre-Christmas fall.
With the UK temperature plummeting, this increases the demand for gas so it’s likely that prices will remain at this level for the next week at least. Temperatures now look to be returning to seasonal norms and despite reports of the UK’s gas storage being low, the markets are still looking positive with recent LNG shipments into UK and Europe.
Market Drivers
Gas
Falling
US's Cheniere Energy's Corpus Christi phase 3 expansion has started producing its first LNG and is expected to be fully operational by March 2025, adding a considerable amount to global LNG supply.
Europe continues to diversify away from Russian gas, with Ukraine receiving its first LNG cargo and Italy increasing its regasification capacity by 10% by April 2025, further improving supply conditions.
Rising
UK and European storage levels continue to be exhausted at a faster rate than last year largely due to colder temperatures and loss of Russian flows which further highlights ongoing buying pressure in 2025.
Severe cold weather forecasts in the US are raising concerns about "freeze-offs" which could cause production disruptions and reduced LNG output amid higher domestic demand for natural gas.
Electricity
Falling
French power exports are expected to remain stable throughout 2025, maintaining 2024 levels, which reached a 22-year record high. The UK imports around 5% of its electricity from France via the interconnector IFA2.
An increase in the UK's domestic price cap by 3% by April is expected to dampen domestic demand and limit overall energy consumption which could provide some bearish signals to the market.
Rising
Significant damage and ongoing attacks on Ukrainian power infrastructure by Russia, coupled with concerns over Slovakia potentially cutting power exports to Ukraine, are driving increased import demand from neighbouring countries which could limit import prospects for the UK as these nations bid on alternatives on the international market.
Market Focus
Energy price cap set to rise by 3% in April.
Britain’s domestic energy price cap was already set to rise by 1% in January, however it is now anticipated to rise a further 3% in April. The predictions are citing ongoing geopolitical instability as a factor that is keeping wholesale energy prices high. Energy regulator Ofgem determines the household energy price cap each quarter, based on a number of factors including wholesale energy prices, supplier network costs and environmental and social levies. With a Trump presidency on the horizon, and an uncertain geopolitical situation in the Ukraine and the Middle East, wholesale market volatility looks set to remain.” However, an increase in the domestic price cap is anticipated to dampen domestic demand, as higher energy costs place additional financial pressure on households, limiting overall energy consumption. This could provide some bearish pressure to markets.
info@dukefieldenergy.co.uk
0345 4022 461