UK Gas and Power contracts remained volatile due to colder weather and continued geopolitical tensions

Looking ahead, UK gas and power prices are expected to remain under pressure as temperatures are forecasted to stay below seasonal norms for the rest of February. The primary focus will continue to be on gas storage reserves, which have been depleting rapidly to meet seasonal demand. Further withdrawals to meet gas consumption will likely exert additional upward pressure on gas contracts.

Although the market has largely shifted its focus away from geopolitical tensions in the Middle East and Eastern Europe, the recent re-entry of Donald Trump into the political arena has introduced renewed volatility, particularly regarding his stance on the Panama Canal and Iran. Norwegian gas flows are expected to remain stable, alongside strong LNG cargo deliveries, which should help limit significant upside potential in gas prices. 

Market Outlook

While the landscape appears stable due to healthy supply fundamentals, short-term price volatility is likely to continue due to geopolitical uncertainties and weather variability. Concerns around gas inventories in Northwest Europe and replenishment in the summer will also be a focus and may support further upside come the summer months. US policy toward Iranian oil is expected to add upward pressure on gas contracts, as any action against Iran could prompt the country to block the Strait of Hormuz, a critical passage for the majority of LNG cargoes operators.

The extent of gas withdrawals throughout Q1 2025 will play a significant role in steering price direction. However, stable Norwegian gas flows and consistent LNG imports are expected to provide some degree of price stability. On the wider commodity complex, the UK Government may link UK carbon allowance prices to the EU, although not yet confirmed, this could increase gas and power contracts prices in long term.