UK Market Steady Despite Geopolitical Risks
- Professional Energy People
- 1d
- 5 min read
UK Energy Market Update
October 2025
Market Summary
In October, EU aggregated gas storage levels began the month at around 83% and ended at approximately 82.8%, showing virtually no net progress over the month. The stagnation left inventories around nine percentage points below the five-year seasonal average and more than twelve percentage points lower than the same time last year. Despite meeting the EU’s interim 83% target for 1 December, limited injection activity and early signs of net withdrawals suggest a tighter outlook heading into winter compared to previous years.
Maintenance on the Norwegian Continental Shelf reduced European gas supply this month, with the UK particularly affected. Early unplanned outages and later planned works limited flows, but as the maintenance schedule wound down, supplies gradually stabilised ahead of winter.
The UK Government will prohibit energy suppliers from offering fixed-term contracts to businesses without smart or advanced meters under its post-2025 policy. With smart meter coverage at 64% of non-domestic sites and expected to reach 88% by 2030, the move aims to protect business consumers and support wider rollout. New licence conditions taking effect in January 2027 will require suppliers to coordinate implementation and provide clear timelines during the transition.
Britain’s energy system operators expect sufficient gas and electricity supplies this winter despite tighter gas margins driven by falling domestic production. National Gas forecasts a 6% decline in UK offshore output, increasing reliance on LNG imports, while Norway remains the largest supplier. NESO reports the strongest electricity margins in six years, supported by new interconnectors, battery storage, and higher gas plant availability. Both operators stress that only an extreme cold spell combined with major supply disruption would pose a material risk to energy security.
The EU formally adopted its 19th sanctions package against Russia this month, accelerating the phaseout of Russian gas and LNG with short-term contracts ending in six months and long-term contracts from January 2027. The move reinforces the bloc’s shift away from Russian energy and is expected to boost reliance on alternative suppliers such as the US and Qatar.
Russia and Ukraine have stepped up attacks on each other’s energy infrastructure, raising concerns over winter supply security. Russian strikes have severely damaged Ukrainian gas facilities, cutting output and forcing Kyiv to increase imports from the EU. In turn, Ukraine has targeted Russian refineries and gas plants, threatening broader supply chains. While Europe no longer relies on Russian pipeline gas, the escalation adds upward pressure to regional prices and intensifies competition for LNG, with the UK also exposed through its links to European markets.
The Israel-Hamas ceasefire has eased Middle East tensions, reducing risk premia for global energy markets. While the region itself is not a major direct supplier of gas to Europe, European oil imports from the broader Middle East benefit from the reduced geopolitical risk, helping to temper short-term price spikes across energy hubs.
Net Zero News
According to new research from the University of Surrey, solar energy is now the world’s most affordable power source, costing as little as 2p per unit in the sunniest regions.
Centrica and National Gas have made a UK first by successfully blending hydrogen into the National Transmission System (NTS) and using it to generate electricity at Centrica’s Brigg Power Station in Lincolnshire.
Global efforts to stop deforestation are significantly off track, with world leaders projected to miss their 2030 zero-deforestation target by 63%, according to the latest Forest Declaration Assessment.
Energy suppliers responded cautiously to Ofgem’s proposal for tariffs with lower standing charges and higher unit rates, warning that the change could confuse customers and further strain affordability.
Britain’s grid balancing costs have surged 25% this year to £2.1 billion, driven by heavy reliance on gas to back up variable renewables. The Nuclear Industry Association advocates that expanding nuclear baseload generation could curb these rising costs, stabilise prices, and boost energy security.
Regulation of energy brokers and third-party intermediaries is now a matter of when, not if. After years of complaints from small businesses and public bodies, the government has confirmed it will give Ofgem new powers to oversee these intermediaries in the energy market.
Energy UK is urging a major reform of Ofgem, arguing that the regulator has grown too large and bureaucratic to effectively safeguard customers or support rapid investment.
Dozens of NHS trusts across England are expected to collectively save up to £65 million on energy bills after installing solar panels at their sites.
For the first time, renewables have surpassed coal as the world’s largest source of electricity, according to Ember’s Global Electricity Mid-Year Insights 2025 report, signalling a significant milestone in the clean energy transition.
Electricity & Gas Prices
UK wholesale gas and power prices eased over October, reflecting improved supply conditions and softer market sentiment. Early in the month, prices were supported by geopolitical tensions and repeated Russian strikes on Ukrainian energy infrastructure, which heightened regional risk premiums. However, as Norwegian maintenance ended and LNG imports remained steady, supply confidence improved. Strong electricity margins, bolstered by new storage capacity and interconnectors, further reduced system strain. By month-end, bearish fundamentals outweighed early gains, with both gas and power contracts ending the month slightly lower amid comfortable pre-winter supply levels.
Flexible Purchasing
EPEX Price
Some of our flexible purchasing customers are buying on EPEX, a European auction for power. Because they auction every hour of each day, customers get the “market average” price as opposed to a fixed-term contract over e.g. a 12-month period. Being on this product means that you will pay the average of each day for the month and once the market falls the price will follow.
The EPEX price finished the month with an average of 7.00 p/kWh (commodity). With the non-commodity added to this, the overall rate will be around 19.50 p/kWh+.
Carbon Prices
In October 2025, EUA carbon prices averaged approximately €79.2 per tonne, up from September’s average of about €75.8/tonne.
The increase was driven by stronger gas and power markets feeding into compliance demand and heightened structural support from upcoming reforms and reduced free allocations in the EU Emissions Trading System. At the same time, sentiment was tempered by concerns over industrial weakness and macro-economic uncertainty, which limited how far prices could run.
Oil Market
3rd - Oil prices inched up in early trading but remained on track for their sharpest weekly decline, around 8%, since late June. This drop is largely linked to growing speculation that OPEC+ will announce a significant production increase at its upcoming virtual meeting.
10th – Oil prices dropped as easing tensions over the Israel-Hamas ceasefire reduced Middle East risk premiums, while expectations of continued strong global supply, including robust US production, added further downward pressure on prices.
16th – Oil prices fell amid forecasts of slowing global demand growth and rising US crude inventories, while persistent concerns over weaker Chinese oil consumption added further pressure on prices.
21st - Oil prices hovered near a five-month low, pressured by concerns over global oversupply, slowing demand, and softening market sentiment.
24th – Oil prices surged 5.4% from the previous close, bringing total gains since the 20th to 8.2%, driven by tightening supply expectations, ongoing geopolitical tensions, and strong demand signals from major economies, which together lifted market sentiment and risk appetite.
31st - Oil prices edged higher but remained under pressure for a third consecutive monthly decline, as concerns over weak Chinese demand and rising global supply continued to weigh on sentiment.
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