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In February, UK inflation unexpectedly dropped to 2.8%, largely due to falling clothing prices. While this decline is a welcome surprise, it is unlikely to shift the Bank of England’s cautious approach to interest rate cuts. Meanwhile, the European Central Bank has reduced its benchmark interest rate by 0.25 percentage points to 2.5%, citing progress toward its 2% inflation target despite a sluggish Eurozone recovery. In Germany, business sentiment has improved following the government’s approval of significant defence and infrastructure spending, outweighing concerns about potential US tariffs.
Brent crude has seen an upward trend since hitting a three-year low of $68.33 per barrel in early March. The front-month contract is now trading at $74.00 per barrel, marking a 7% increase. This rise is driven by renewed geopolitical tensions and concerns over global supply constraints, particularly as US sanctions on Venezuela and restrictions on Iranian oil trade could remove 1 to 1.5 million barrels per day from the market. Additionally, stronger-than-expected demand from the US—the world’s largest oil consumer—has supported prices, with crude inventories declining more than anticipated. However, analysts caution that the global oil market remains uncertain, as new US tariffs on key trading partners could raise fears of an economic slowdown, potentially weakening crude demand.
UK carbon prices have climbed once again following remarks from Spencer Livermore, the Financial Secretary to the Treasury, who suggested that the government is considering linking the UK’s Emissions Trading Scheme (ETS) with the EU’s system. The December 2025 contract is currently trading at £44.00 per tonne, up £5.00 per tonne since early March. Across Europe, short-term power prices have been under pressure due to rising temperatures and increased wind and solar generation. In Germany, peak solar output exceeded 40 GW on Friday, causing negative prices during midday hours. Despite economic and geopolitical volatility, Winter 2025 power prices have remained relatively stable this month, fluctuating within a £12.00 range and closing at £89.00/MWh—down 2.7% overall.
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Ukraine is set to receive €410 million in loans and grants from the EU and Norway to replenish its gas stocks, which have plummeted to a record low of 3.4%. Despite having Europe’s largest gas storage capacity of 32.6 billion cubic metres (bcm), Ukraine’s current reserves stand at just 1.1 bcm—the lowest level since data collection began in 2011. In North America, LNG Canada is preparing to receive a ‘cool-down’ cargo from Australia in April, a crucial step in launching operations at the country’s first major LNG export facility. This delivery will help operators prepare storage tanks for liquefaction, with production expected to commence shortly thereafter. Meanwhile, in Europe, gas storage withdrawals have slowed significantly over the past two weeks due to mild temperatures and favourable renewable energy conditions. Storage facilities are currently 33.7% full, reflecting a 5.8% decline, compared to a 15.2% drop in February. As spring approaches, gas injections are expected to resume in preparation for the next heating season.
Over the past two weeks, gas and power prices have edged lower amid ongoing geopolitical volatility and economic uncertainty, fuelled by various policy announcements and measures from the US administration. The primary driver has been the short-term market, where mild temperatures and strong solar generation have significantly reduced gas and power demand. However, with European gas storage levels at 33.7% and a limited supply of additional LNG cargoes in the coming months, the downside to forward prices appears constrained. As a result, a 5-10% price drop would present an attractive opportunity to increase hedging ratios.
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