Strong renewable output, coupled with low demand driven by mild weather and extended weekends across the UK and much of continental Europe, continues to exert downward pressure on short-term prices. However, prices for July and beyond remain supported by ongoing and upcoming maintenance in Norway and the US, forecasts of reduced wind output, and continued geopolitical uncertainty surrounding Russia-Ukraine developments.
While European storage levels have improved — now nearing 50% — the outlook is tempered by the arrival of warmer-than-average temperatures, already affecting southeastern Europe coinciding with concerns surrounding the French nuclear fleet. The emerging ‘Spanish plume’ heatwave across much of Europe has differing implications for the UK and mainland Europe.
The UK is likely to see gas muted gas demand, but continental Europe typically sees a surge in electricity demand during heatwaves due to much higher levels of cooling-related power demand from air conditioning etc. There are still other risks to the short-term market prices including the EU’s decision on further cuts to Russian gas imports and the onset of the hurricane season in the US.
The recommendation remains to increase hedging ratios, particularly for Winter 2025, where the upside risk significantly outweighs the downside. Europe’s hydroelectric power generation fell by 13% in the first five months of 2025 compared to the previous year, driven by below-average snowpack in the Alps and weak spring rainfall. May’s output of 71 terawatt hours was the lowest for that month since 2017.
As a result, utilities are increasingly relying on gas and coal, with the risk of further dependence if dry conditions continue, which may lead to increased prices due to supply and demand fears, especially as the EU looks to restock gas supplies ahead of winter.
