UK Energy Market Analysis - October 2025

Recently, warmer and windier-than-average weather has driven short-term prices lower. However, the absence of gas injections into European storage facilities—which remain 82.8% full—continues to provide underlying support. Against this backdrop, market attention is turning to the commissioning of the Golden Pass LNG plant on the US Gulf Coast. A cool-down cargo is expected in the coming weeks, likely to be followed by the start of commercial operations and potentially the first shipments to Europe before year-end. Looking ahead, declining wind generation and a gradual return to seasonal temperatures this week should help stabilize prices in the near term. Nonetheless, the longer-term outlook remains bearish, thanks to expectations of oversupplied oil and LNG markets heading into 2026.

Economic Environment

• As expected, the Federal Reserve cut interest rates by a quarter point but cautioned that another reduction this year is not a “foregone conclusion.” Meanwhile, the European Central Bank left rates unchanged for a third straight meeting.
• British construction activity contracted for a ninth consecutive month in September, as major investment decisions were put on hold until after the Autumn Budget, while broader private sector activity declined for the first time since April.
• Sterling has recently hit a near three-month low against the dollar and a two-year low against the euro as rate-cut expectations and fiscal worries mount, with the OBR set to lower productivity forecasts by 0.3 points, widening the deficit by about £20 billion.

Oil

• Prices remained under bearish pressure amid persistent concerns over slowing global demand and expectations of a looming supply glut. However, optimism surrounding US–China trade talks and, more notably, Western sanctions on major Russian oil producers triggered a price uptick on fears of export disruptions. The front-month Brent contract settled near $65 per barrel, recording a 2% decline for the month.
• Despite softer US and Asian demand, OPEC+ is considering raising output by up to 500,000 barrels per day over the next three months, driven by Saudi Arabia’s push to reclaim market share.
• The IEA projects a global oil surplus of nearly 4 million barrels per day in 2026, an unprecedented level, driven by slower demand growth and higher non-OPEC output, and nearly 20% above its previous estimate.

Gas

• EU member states have approved their 19th sanctions package against Russia, introducing a ban on Russian LNG imports starting in 2027. Additionally, EU nations reaffirmed their plan to end all Russian pipeline gas imports by 1st January  2028, aligning with the European Commission’s strategy to phase out Russian energy.
• A second LNG cargo has departed Russia’s Portovaya liquefaction plant, underscoring Moscow’s continued push to expand gas exports despite Western restrictions. The facility resumed shipments after sanctions halted them in 2024, having previously supplied Turkey, Greece, China, Spain, and Italy. The development follows Russia’s renewed LNG deliveries to China since September from its also-sanctioned Arctic LNG 2 project.
• LNG Canada has begun bringing its second liquefaction “train” online, with flaring expected through Nov. 10 as part of standard startup procedures. The first train, which started in summer, has exported more than 15 cargoes since June.
• Gas injections into European storage facilities have largely come to a halt this month. Depending on renewable output and temperatures, some days have seen small withdrawals and others modest injections. Storage levels currently stand at 82.8%, up by only 0.2% since 1st October, a supportive factor for the gas market.

Power

• The UK has reduced its offshore wind auction budget from £1.1 billion last year to £900m for “fixed-bottom” projects, while allocating £180m for floating wind. Analysts warn that this level of funding may only deliver around 5 GW of new capacity, well short of the 7–9 GW needed each year to meet the country’s 2030 clean power targets.
• EDF has restarted its newest nuclear reactor, Flamanville 3, following maintenance and repairs since June. Commissioned last December after being over a decade delayed and billions over budget, it will gradually ramp up to full capacity by the end of autumn. It should generate about 8.1 TWh annually from 2026 - 2028 (around 2% of French nuclear output) and 11.5 TWh from 2029 - 2031.
• Large fluctuations in wind generation and temperature have driven significant volatility in day-ahead markets this month. In contrast, longer-term power contracts have remained relatively stable: prices for Summer 2026 rose just 1.4% over the month, largely reflecting a 3.5% increase in carbon prices.
  
  

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