The flexible energy & risk team at Control Energy Costs has put forward their predictions for what can be expected in the 2025 energy market. With 2024 ending in the midst of turbulent times, a mixture of geopolitics, renewable energy transitions, and extreme weather have left many in the industry in a state of uncertainty.

Here’s what Mike Stafford, our Flexible Procurement and Risk Manager has to say:

As 2025 begins, energy users of all sizes are entitled to ask ‘what does this year have in store?’

Caveats apply - it’s not just the high cost of melting down glass that prevents the sale of functioning crystal balls – but there are several trends from 2024 which look set to continue into 2025.

Volatility

On New Year’s Day, piped Russian gas flows into Europe fell to zero as expected.

This in itself was not a surprise to markets. If anything, this marks another chapter in the European pivot away from piped Russian gas and towards seaborne gas imports (i.e. LNG).

While pipelines hardwire the relationship between buyer and seller, LNG is a global market, with bitter winters in Asia capable of pushing up gas prices in Europe as continents compete for cargoes.

As the composition of European gas supplies continues to change, and as more LNG comes online, expect plenty of opportunity for bulls and bears to talk up their positions.

Demand destruction

Europe’s gas imports overall are still 20% down on the 12m period prior to the Ukraine invasion, with ramping up of renewable power generation, increased energy efficiency and industrial malaise all contributing to a sustained reduction in gas demand.

With 2025 looking primed for further renewable rollout, ongoing pain on prices, and trade wars waged by the incoming US president, it is unlikely European gas demand will return to its pre-war levels.

Distracting headlines

During 2024, fractious geopolitics gave bulls the opportunity to talk up gas and power prices, often with scant justification. Barring Qatari LNG imports, UK gas and power markets have negligible exposure to Middle East, but commentators often flagged the Iran / Israel conflict as a bullish factor.

Supply and demand matter much more than geopolitical headlines. However, with 2025 seeing the return of the headline-maker-in-chief to the White House, and with gas exports a likely front in any future trade war, we can expect headlines to continue to distract the less-disciplined.

Overview

There are dots that can be joined here. The new US president has promised to support US oil and gas exports at the expense of renewables, and can be expected to export this approach, mandating its adoption by friends and foes alike through the use of economic force if necessary, with tariffs on key exports a likely weapon. Tariffs, added to years of high gas and power prices, will add more stress to European industry, suppressing demand still further as businesses shutter or relocate.

As growing volumes of LNG meet suppressed levels of European gas and power demand, there is likely to be downside opportunity in the market.

Participating in downside market moves whilst managing exposure to risk will require guidance from experts in flexible purchasing. CEC’s risk management team are ready and waiting to support.

If you’re interested in our flexible energy procurement services or would like more information on our services contact us today.