Strong renewable output, combined with low demand (driven by mild weather and extended weekends across much of continental Europe) has put downward pressure on short-term prices toward the end of the month, particularly in the power market. In the UK, the baseload price for Sunday 25th cleared at just £1.30/MWh. However, the broader outlook is less bearish. While recent tariff developments add to ongoing market uncertainty, they also suggest a relatively resilient economic backdrop.European gas storage levels are not increasing at a sufficient pace, and the gap compared to 2023 and 2024 remains significant. Additional upside risks include the early heatwave in Eastern Europe, the upcoming hurricane season in the US, and the possibility of further EU and US sanctions on Russian gas. Taken together, these factors suggest limited downside for both gas and power prices, with current levels presenting a buying opportunity.
Economic Environment
• The Bank of England has cut interest rates by 0.25 percentage points to 4.25%, in line with expectations, citing concerns over the potential economic impact of US trade policies. It signalled that any further adjustments will be gradual and cautious.
• UK retail sales rose 1.2% in April, beating forecasts as warm weather lifted food spending. Meanwhile, a separate report showed consumer confidence ticked up in May, likely supported by lower interest rates and easing trade tensions.
• In Germany, consumer sentiment is expected to improve slightly heading into June; however, it remains very low amid ongoing domestic economic challenges and turbulence caused by tariffs and stock market volatility. Moreover, unemployment rose more sharply than expected in May.
Oil
• Oil prices resumed their decline in early May, pressured by rising trade tensions that weighed on both financial and commodity markets, as well as OPEC+’s decision to further unwind production cuts. Since then, bearish sentiment has eased somewhat following the US trade agreements with the United Kingdom and a 90-day accord with China. Prices also found support from the prospect of new sanctions on Russia and diminishing hopes for a US-Iran nuclear deal. Brent crude futures have traded within a range of $58.25–66.25 per barrel and currently stand at $64.00.
• Meanwhile, Goldman Sachs reaffirmed its oil price forecasts for 2025, projecting Brent at $60 per barrel and WTI at $56 per barrel. It cited rising supply, increasing inventories, and a structural shift away from petroleum fuel use in China as key factors weighing on prices.
• According to the EIA, global oil consumption is projected to grow by less than one million barrels per day in both 2025 and 2026, with the agency citing economic headwinds and geopolitical uncertainty as key factors behind the slower pace.
Gas
• Egypt is in talks to purchase 40–60 cargoes of LNG ahead of peak summer demand, according to sources, as domestic gas production fell again in February to a nine-year low. Since early 2024, Egypt has reverted to being a net importer, scrapping export plans amid declining output. Long-term import needs could rise to as many as 150 cargoes per year.
• Qatar has confirmed it will begin exporting LNG from its North Field East expansion project by mid-2026, increasing annual capacity from 77 to 110 million tons. The project’s timing is crucial amid global supply delays and rising demand in Europe and Asia. While earlier estimates varied, this marks the first clear timeline for the start of production.
• In North America, Venture Global’s Plaquemines LNG plant and Cheniere’s Corpus Christi Stage III expansion are ramping up. Plaquemines Phase 1 is already nearing full capacity, while Corpus Christi will gradually add 10.5 mtpa through seven mid-scale trains. Looking ahead, LNG Canada is expected to begin production soon, and key questions for 2026 include the pace of the US Golden Pass ramp-up and the timing of Qatar’s major expansion projects.
• Ongoing maintenance at North Sea gas facilities and limited LNG cargo availability have restricted European storage gains to just 7.2% month-on-month, with current levels at 47.1%.
Power
• Power traders in Southeast Europe anticipate summer price spikes similar to last year, driven by record-low hydro availability. Current output remains weak, with a regional shortfall of 2 TWh estimated for Q2. The Hungarian front-month contract has risen steadily, widening its premium over the German equivalent to nearly €30.
• The UK and EU have agreed to work toward linking their emissions trading systems (ETS) and providing mutual exemptions from carbon border adjustment mechanisms (CBAMs) as part of broader post-Brexit cooperation. The agreement outlines key sectors to be included, such as electricity, industry, and transport, and aims to avoid carbon leakage and competitive distortion. While no completion date is set, both sides aim to finalize the linkage swiftly, potentially by end of 2025.
• Winter 25 prices have been supported throughout the month by an improved economic outlook, driven by easing tariff tensions, as well as by strength in the gas and carbon markets. However, prices have pulled back over the past couple of days, resulting in a modest monthly gain of 4%.
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