UK Energy Market Analysis - August 2025

Weak wind and solar output across Europe has supported short-term power prices lately, with German spot averaging €90/MWh and the UK £86/MWh on N2EX last week. Looking ahead, temperatures are expected to remain near seasonal norms, wind generation is forecast to improve in the coming days, and nuclear availability is set to rise. Long-term prices have eased through August, driven by ample LNG supply and continued storage injections, as market attention now turns to key Norwegian gas maintenance amid a lull in geopolitical developments. While delays to Norwegian maintenance and potential US sanctions on Russia pose near-term upside risks, the broader outlook remains bearish due to higher OPEC+ output and ongoing global LNG growth.

Economic Environment

• Despite headwinds from US trade tariffs and a softening labour market, Britain’s economy grew 0.3% in the second quarter of 2025, slowing less than expected from a robust 0.7% expansion in the first quarter.
• UK inflation rose to 3.8% in July, above forecasts of 3.7% and June’s 3.6%. The reading is above the BoE’s target for the 10th straight month, reducing chances of further rate cuts this year.

Oil

• Brent fluctuated within a $7 range in August, ending near $68 per barrel. Prices came under pressure from the easing of OPEC+ production cuts, trade tensions, and seasonal demand slowdowns, but found support from unexpected US inventory draws, geopolitical risks, and expectations of a dovish Fed.
• OPEC+ agreed this month to raise oil production by a further 547,000 barrels per day in September, fully unwinding its nearly two-year strategy of supporting prices by withholding substantial volumes of crude from the market.
• The US has raised tariffs on Indian exports to 50% to curb India’s discounted Russian oil imports. The move could affect Indian exports and certain sectors of the US economy, while supporting US oil producers.

Gas

• •British Gas owner Centrica said it will acquire National Grid’s Grain LNG terminal in partnership with US-based infrastructure investor Energy Capital Partners. Centrica’s 50% equity stake is valued at around £200 million, while approximately £1.1 billion of the overall transaction relates to project debt. The deal comes shortly after Centrica’s July bid to take a 15% stake in the planned Sizewell C nuclear power project.
• A levy introduced in Germany in 2022—currently set at EUR 2.89/MWh—to help fund gas storage will end next year if legislation approved by the cabinet on Wednesday becomes law. Abolishing the levy on 1 January 2026 would result in the German government missing out on between EUR 3 billion and EUR 3.4 billion in revenue that would have been used to pay for gas in storage. The shortfall will instead be covered by Germany’s climate and transformation fund.
• Norwegian gas production is undergoing major planned maintenance across several fields and processing plants, expected to last about a month. The temporary cutbacks will tighten supply and may support prices, particularly as wind generation is forecast to remain moderate. Aggregated flows to Europe are set to drop by around 127 mcm/day until 18 September, after which output should begin to recover.
• European gas markets are seeing relief in the pressure to refill storage ahead of winter, as weaker LNG demand in Asia—particularly from China—is freeing up global supplies for Europe. Although storage remains below last year’s figures (76% of capacity versus 92% in 2024), rising US exports (+22%) and other LNG inflows are expected to help the EU reach its mandated 90% storage target by October.

Power

• Industry leaders have welcomed approval for what could become one of the world’s largest offshore wind farms. The Berwick Bank project — a 4.1GW development with 307 turbines located about 38km off the Scottish Borders coastline — will now pursue a Contract for Difference before a final investment decision is made.
• French utility EDF has removed Belleville 1 (1.3 GW) and Tricastin 2 (915 MW) from its list of reactors at risk of extended outages due to stress corrosion. Belleville 1 was last operating near full capacity, while Tricastin 2, offline since June for planned maintenance, is set to restart on 9 September. Eight other reactors remain at risk of prolonged shutdowns this year amid ongoing corrosion investigations.
• The downside observed in gas markets, driven by comfortable fundamentals, ample LNG supply, and continued EU storage refilling, has pressured power markets. Winter 25 power prices traded within a £5.5 range and ended the month 3.7% lower.

If you would like the latest insights weekly, sign up for our Energy Market Update.