Business Energy Market Update: February 2025

Predictably January 2025 saw the market for day ahead and February deliveries rise markedly throughout the month with gains of around 10% on both fuels. Price drivers were a mix of unplanned outages both in the North Sea and at some LNG Export facilities and also geopolitical influences.

Whilst no-one likes to see prices rise, the market may have closed even higher were it not for the News on Friday that the Freeport LNG terminal, one of the worlds largest, was now nearly back at full export capacity. Gains were softer further out on the curve but still notable at around 5% on electricity. Despite some small rises for Q3 and Q4 2025, forward contracts for gas delivery into 2026 remained relatively stable though; no doubt influenced by the news below.

News continued to circulate in late January of a possible additional source of gas for Europe. First mentioned last Autumn, the potential for Azeri gas to transit into Europe though the now obsolete Ukrainian network took a step closer to becoming reality with Kyiv affirming Ukraine would be willing to transit such gas via its infrastructure for onward transmission to Central Europe. If such an agreement were to be struck, it holds the potential to alleviate concerns regarding ‘reinjection’ demand over the warmer months. In the run up to next Winter European gas storage facilities need refilling to ensure price stability at the start of Winter 2026.

Should both parties reach an agreement, the contract could be drawn up quickly but Azerbaijan will need more solid pledges from end customers before committing to further increasing production to meet the new demand. Socar, Azerbaijan's state-owned oil and gas company, has already agreed to increase gas exports to the EU by 17% by 2026 with exports piped into Europe through Turkey however the route is at capacity and cannot take on any extra delivery contracts in the near future.

The news comes at a time when but countries including Slovakia and Hungary are looking to secure new sources of LNG after Russian gas stopped flowing last month. Although most European countries have long since ceased imports, Russian gas consumed in these markets still accounted for 5% of the continent’s consumption.

The rise in day ahead prices last month also saw the price for power briefly surge to its highest recorded level in two years at just over £241/MW as a huge fall in wind output and colder weather saw the UK turn to France and the interconnectors to make up the shortfall.

Also in the news was Germany’s decision to roll out smart metering technology to its domestic customers. The project, fraught with concerns over data privacy, high installation costs and restrictive cyber security concerns, comes a decade after the UK started its own rollout of the technology!

As ever the team at CUS are on hand to answer any utility related questions and if you are due to renew any time in the next 12 months now is a great time to start looking at your options.