Falling demand and steady supply outlook supports losses

Seasonal contracts trended bearishly in the second half of March, with summer and winter contracts for 2025 reflecting noteworthy losses in both gas and power indexes. Further out on the commodity complex, oil markets experienced gains overall compared to February, with U.S tariffs continuing to be the main price driver. Concerns over a global trade war were high on the list of outcomes, with risk of supply overall being tighter despite OPEC+ not changing their stance on increasing production in Q2. Though with that said, economic growth could be at risk which can contribute to diminishing demand, leaving the price direction bearish in the longer term. With that said, the impact on UK and European gas & power prices is likely to be limited for the time being, as Europe’s main concerns will be around storage replenishment over the summer period.

Despite calls of a pause to fighting for 30 days between Russian and Ukraine, which was not achieved, an agreement on not targeting energy infrastructure was agreed which eased some concerns around the supply outlook for the future. The progress of the peace deal is likely to be concluded in stages rather than a sudden end, therefore the longer-term outlook is likely to remain uncertain as both supply and demand drivers and geopolitical tensions are likely to keep the market somewhat volatile.

Market Outlook

As the supply and demand outlook remains steady, and geopolitical concerns set to remain apparent in the long term, the market outlook will be uncertain for the time-being, as a view on price direction is still not clear. Warmer temperatures at the moment will continue to add bearish sentiment and assist in storage replenishment over the summer which will be the main focus throughout Q2 & Q3. Scheduled maintenance on gas facilities in Norway (due in April) will also be a key factor in the short-term with any interruptions likely to add upside into prompt contracts at least.

Uncertainty will most likely remain throughout the summer, as geopolitical tensions look far from being resolved despite the best efforts from Donald Trump. New U.S Tariffs will also have an impact on the wider commodity complex as a global trade war and concerns around oil demand and economic growth will continue to persist but is likely to have limited impact on gas and power prices, unless tariffs are put on LNG from the U.S, who export a significant amount to Europe and falling gas demand due to reduced economic activity.