Jun25 Energy Market BriefStronger Volatility in Wholesale Prices Return

May saw stronger volatility in wholesale prices across tracked gas and power contracts when compared to last month, with shorter-term contracts registering losses while longer-dated contracts saw increases. However, the expectation is that this trend will likely subside into the summer months, acknowledging this typically represents the lowest demand period of the year; subject to any unforeseen events.

Seasonal gas contracts from winter 25 to winter 27 were, on average, 1.8% higher in May when compared to the previous month, finding support from lower Russian piped gas supplies alongside a stagnation in ceasefire talks. On 20 May, US President Donald Trump announced immediate ceasefire negotiations between Russia and Ukraine; but Russia stated this will take time, resulting in a more bullish outlook for gas prices.

Moreover, ongoing conversations around tariffs on Chinese and EU goods from US President Donald Trump supported the market, and on 12 May, the US and China reached a deal on temporarily halting trade tariffs between the countries. This supports NBP gas prices due to improved outlooks for global economic growth, and gas demand by extension.

However, we also saw that prices found bearish influence across the month, most notably on 23 May, when US President Donald Trump threatened to add a tariff of 50% on European goods. This has the potential to lower European gas prices considerably, and prices across GB by extension, as industrial gas demand across the continent will strongly decrease in response to the tariff increase.

However, since the initial announcement, President Trump has subsequently adjusted the timeline, postponing the imposition of the 50% tariff on EU imports until 9 July.

Across May, we saw the day-ahead gas price drop 4.5% to average 83.03p/th due to reduced gas-for-heating requirements as we begin to move into the summer delivery period, alongside periods of strong wind and solar generation.

However, stronger losses across shorter-term contracts were limited by extensive maintenance across the UK and Norwegian Continental Shelves, acting to reduce total flows available for import into GB.

Due to the intrinsic link between gas and power prices, this bearish trend was extended to GB baseload day-ahead power contracts – averaging £77.88/MWh, down 3.6% when compared to April.

This reduction is strongly attributed to the loss seen in its gas counterpart, in tandem with notably strong wind generation levels at the end of the month, with wind generation contributing to 67% and 68% of the generation mix on 25 and 26 May respectively, alongside milder weather conditions, leading to strong exports over interconnectors from 25-27 May.

As a result, on 28 May, day-ahead power fell to £55.88/MWh, the lowest seen since December 2024.

Opposing this, seasonal power prices saw collective upwards price movements, rising 3.1% on average, finding support from ongoing tariff conversations and increased NBP gas prices.

In the commodities markets, Brent crude prices continued to drop across May, seeing a 3.7% decline month-on-month to average $64.10/bl, falling to the lowest level seen since February 2021 at $61.42/bl on 2 May.

Brent crude oil saw price losses influenced lower with reports suggesting OPEC+ will raise production by 411,000 barrels per day in June, alongside rising US crude inventories, and the resumption of nuclear negotiations between the US and Iran.

Both ETS schemes registered month-on-month gains with the EU ETS rising 9.0% to average €71.38/t, and the UK ETS seeing an increase of 11.9% to average £51.35/t.

Gains across the UK ETS were supported by the announcement of the UK-EU market linkage on 19 May, with prices reaching the highest level seen since July 2023 at £55.00/t on 20 May.