Despite bearish short-term fundamentals, gas and power prices have risen lately due to several factors. First, weather forecasts point to another heatwave across Northwestern Europe, accompanied by low wind generation. Second, a sharp rebound in the US dollar against the euro and sterling has pushed up the price of LNG, coal, and oil products. Third—and potentially a major market driver—the threat of increased US tariffs and penalties on Russian energy buyers has resurfaced. On Monday, Mr. Trump said Russia had “10 or 12 days” to agree to a ceasefire in Ukraine or face tariffs, along with its oil buyers. It remains to be seen whether this rhetoric will impact Russian oil exports and, crucially for European gas prices, whether it will affect Russian pipeline gas or LNG flows. Assuming any disruption proves short-lived, prices should decrease in the coming weeks, as the underlying fundamentals remain bearish due to rising OPEC+ oil output and the continued increase in global LNG production.
Economic Environment
- UK business activity grew only modestly in July, while employment declined at the sharpest rate in five months, as subdued demand conditions continued to dampen hiring intentions. This is likely to fuel speculation about a Bank of England interest rate cut next month.
- The European Central Bank held interest rates steady in July, pausing after seven consecutive cuts as it waits for clarity on Europe’s trade relations with the United States.
- The US economy rebounded with 3.0% GDP growth in Q2 2025, following a Q1 contraction. The Federal Reserve kept interest rates steady, signalling a cautious approach amid inflation and trade uncertainties.
Oil
- Brent prices traded within a relatively narrow $4 range until this week, when the threat of increased US tariffs and penalties on Russian energy buyers resurfaced. On Tuesday, Mr. Trump said Russia had “10 or 12 days” to agree to a ceasefire in Ukraine or face tariffs—along with its oil buyers.
- US exports of crude oil, LNG, and coal to China fell to zero last month amid ongoing trade tensions and retaliatory tariffs, increasing supply availability in global markets.
- Goldman Sachs expects OPEC+ to announce a final 0.55 million barrel per day (mb/d) production increase for September at Sunday's separate gathering of eight OPEC+ members.
Gas
- Centrica has announced it will likely produce gas from the Rough facility this winter instead of stockpiling it, citing unsustainable losses. The company has been in extended discussions with the government over a proposed £2 billion overhaul to expand and redevelop Rough for gas and hydrogen storage, with outcomes expected in early autumn.
- Shell-led LNG Canada is currently loading about one cargo per week following technical issues reported earlier in the week. A spokesperson for LNG Canada has said that the normal pace for the plant’s first phase would be one cargo every two days. Meanwhile, Norway’s Equinor has extended a maintenance outage at its Hammerfest LNG terminal due to problems with a compressor in the plant’s cooling system. The restart is now planned for August 3.
- Venture Global has secured $15.1 billion in financing to move forward with its Calcasieu Pass 2 liquefaction plant in Louisiana. The project will increase the company’s export capacity by more than 70%, from 39.2 million to 67.2 million metric tons per annum (MTPA) by 2027. It marks the third major US LNG export investment decision this year and will position Venture Global as the leading LNG exporter in the US, surpassing Cheniere Energy.
Power
- The UK Government has approved the Sizewell C nuclear power plant, also unlocking financing for British nuclear energy through the Regulated Asset Base (RAB) model, which combines public funding with private capital. Sizewell C is expected to be delivered at an estimated cost of £38 billion, with the Government initially taking a 44.9% stake, La Caisse 20%, Centrica 15%, Amber Infrastructure 7.6%, and EDF 12.5%.
- UK carbon prices have risen by around 10% this month, with the UKA December 2025 contract currently trading at £51.50/tonne, following the European Commission’s proposal of a draft decision to authorize negotiations on linking the EU and UK emissions trading schemes.
- The UK government has decided to retain a national electricity pricing model, abandoning plans to switch to a zonal system after months of debate. As a result, wholesale electricity prices will remain uniform across the country, avoiding regional cost disparities, a decision broadly supported by industry groups.
- The unstable economic and geopolitical backdrop increased volatility in power prices: the Winter 25 contract traded within a £7.00/MWh range (around 9%) and ended the month up 7.5%.
If you would like the latest insights weekly, sign up for our Energy Market Update.