Energy Market Update - 02 January 2026
Cold expected to extend beyond week 1 lifted gas and power into the year end. Moves were modest but broad based, with curves supported by firm carbon and thin liquidity.
Gas and LNG rose as forecasts kept the UK and North West Europe well below seasonal norms into mid January. Participants priced higher residential demand and a pick up in gas for power whenever wind fades. Supply remained orderly - Norwegian pipeline nominations were steady and LNG receipts across North West Europe continued to provide cover. Storage withdrawals increased in line with the weather but inventories still offer a cushion. With liquidity light over the holidays, the colder change had an outsized impact on near-curve pricing.
Power followed higher. The UK week-ahead baseload contract gained £1.98/MWh to close at £91.99/MWh as the colder start and early January wind trough tightened margins. CCGT burn is set to rise in low-wind hours, though the stack should loosen quickly when output improves. Interconnectors continue to stabilise the prompt, keeping intraday spikes in check.
Other commodities added support. UKA front year remained firm, and the UKA - EUA spread narrowed to minus £9.17 per tonne. Sentiment around linkage improved, with expectations of negotiations concluding in the first half of 2026. Carbon strength continues to underpin forward power even as gas leads day to day. Overall the set-up is weather led. If the cold persists and wind under-performs, near-curve support should hold, while robust Norwegian and LNG supply limit upside.