Market Insight Report Wholesale energy market update
January 2025
Reduced storage levels and Ukraine transit deal ends.
European and UK gas storage facilities for much of the quarter were in a similar or better supplied position than previous years. Consequently, UK energy prices remained subdued for much of the quarter. Although, wholesale energy markets saw price rises quarter on quarter.
Neither the UK nor Europe had experienced significant unseasonably cold temperatures. However at the end of Q4 2024, there were cooler temperatures, lower levels of renewable generation, and the end of the Ukraine-Russia Transit Deal.
The market is pricing gas for delivery into 2025 summer at a higher rate than the winter (October 2025 to March 2026). This is highly unusual. The market is potentially moving to both price-in the reduction in the risk premium associated with the Ukraine Russia conflict, and fulfil the EU’s gas storage regulations.
European storages less well stocked than previous years
Gas storage facilities withdrew more gas in early winter than in previous years. The UK and Europe had 18% less gas stored at the end of the year than in 2023. The low stock levels have left gas, and to a lesser extent power, more price sensitive to changes in weather.
The end of the Ukraine-Russia Transit Deal
Up until the end of 2024 Russia had been paying Ukraine to transport some of its gas exports to Europe through Ukraine, in spite of the on-going conflict. The gas through this agreement supplied many central and eastern European nations including: Austria, Hungary, Slovenia, and Moldova.
Although there were some hopes an agreement could be reached, in potentially using Azerbaijani gas to transit rather than Russian produced gas, the deal expired without a renewed agreement on December 31st. This appeared to surprise markets resulting in price increases across the UK and Europe, the lack of Russian gas via Ukraine left parts of Moldova without any gas – having failed to secure alternative supplies.
Over Q4 2024, prices rose by 24% for gas and power contracts delivering into summer 2025, peaking on the last trading day of the year. The late December price rally closely aligned with unseasonably cool temperatures, putting further demand pressures on storages, and looming expiry of the Ukraine-Russia Gas Transit Deal.
The Gas market exhibited a particularly odd price structure with Summer 2025 contracts reaching price levels above Winter, possibly as the market anticipates an expeditious end to the conflict in the Summer, following the US Presidential Election result.
Related articles
Third party costs - what are they and recent changes
Additional information
Daily Stock Levels (GSE), Refinitiv, 19/01/2025
ICE UK Baseload Power Futures, 19/01/2025
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