Energy Market Report - 06 March 2026
Gas and power markets pulled back from multi-year highs as diplomatic signals around the Middle East and proposed naval escort plans for the Strait of Hormuz eased some of the geopolitical premium. The broader energy complex remains elevated, however, with crude oil up roughly 20% on the week and supply risks far from resolved.
Natural Gas
UK gas prices continued to consolidate lower from Tuesday's extraordinary spike, though the curve remains firmly elevated by historical standards. The NBP front month settled at 131.50p/therm on Thursday - well off the 171.20p/therm peak hit earlier in the week - with the day-ahead closing at 128.00p/therm. Friday morning saw the front month offered around 136p/therm as sentiment steadied. The physical balance is comfortable for now: system demand rose to around 243 mcm/day but the system opened 12 mcm long, with Langeled flows picking up to 73 mcm/day and total LNG send-out running at approximately 67 mcm/day from Dragon and South Hook. GASSCO reported Norwegian exit nominations at 320 mcm/day, though an unplanned outage at Oseberg trimmed 6.2 mcm/day. Gas-for-power demand is forecast to drop by 16 mcm/day on the day-ahead to 46 mcm/day as wind generation improves, although output has been well below seasonal norms for much of the week.
The structural picture is less reassuring. The S-26 gas contract continues to trade at a premium to W-26, which disincentivises summer injections and raises questions about refilling economics ahead of the critical storage season. EU gas stocks fell to 29.76% on 3 March and net withdrawals have picked up, though above-seasonal temperatures forecast for the UK and the Continent through at least 19 March should moderate draws. LNG diversions to Asia - where JKM is commanding a premium over European hubs - are an early warning sign for European storage targets this summer. Comments from President Putin suggesting Moscow could curtail European gas deliveries ahead of the planned 2027 phase-out, alongside the sinking of the UK-sanctioned Russian LNG carrier Arctic Metagaz in the Mediterranean, have added further layers of medium-term supply anxiety.
Electricity
UK baseload power tracked the gas curve, with the day-ahead settling at £119.63/MWh on Thursday and peak power at £131.00/MWh. The April contract settled at £102.14/MWh and is being offered around £102.50 this morning, while S-26 baseload sits at approximately £95-97/MWh and W-26 in the low £90s. Wind generation averaged just 10.6 GW between Monday and Thursday, down from 16.1 GW across the same period last week, which has amplified the bullish transmission from gas to power and increased reliance on CCGT plant. Forecasts suggest some improvement in wind from the latter part of next week, but until that materialises the prompt will remain sensitive to gas price swings and system tightness during peak hours.
The nuclear fleet continues to operate well below capacity. Hartlepool unit 2 has been offline since June 2025, and Torness unit 2 and Heysham units are all subject to planned or unplanned outages, removing over 2 GW of baseload generation from the system. This is keeping clean spark spreads supported even as carbon pricing has softened, and limits the downside for near-curve power until availability improves.
Other Commodities
Brent crude surged to $85.41/bbl, up roughly 5% on the day and around 20% week on week, as the escalation of the US-Israel conflict with Iran and the Strait of Hormuz closure drove a significant risk premium into the barrel. WTI followed at $81.01/bbl. Prices pulled back modestly on Friday morning after President Trump suggested the US could take action to reduce pressure on oil markets, and sanctions on Russian crude deliveries to India were eased in an attempt to alleviate supply tightness. Time spreads remain firm, reflecting genuine concern about physical availability rather than purely speculative positioning. Coal ARA CIF Cal-27 rose to $123.33/tonne, up around 8% week on week, as the broader energy complex lifted solid fuel economics.
Carbon
Carbon bucked the broader trend. EUA Dec-26 slipped to €70.35/tonne, down marginally on the day, while UK ETS Dec-26 fell more sharply to £41.90/tonne, losing nearly £2 on the session. The divergence between EUA and UKA pricing widened further, with near-term direction continuing to be driven by residual thermal load and auction schedules rather than compliance buying. The geopolitically driven increase in gas-for-power demand could offer some support to carbon if sustained, but for now the market appears more focused on weak industrial signals and the oversupply of allowances at auction.
Outlook
The market enters next week still navigating an unusually wide range of outcomes. On the bullish side, the Strait of Hormuz remains closed, Russian supply rhetoric has hardened, and LNG cargoes are beginning to divert to Asia - all of which threaten European refilling economics ahead of the injection season. On the bearish side, mild weather forecasts through mid-March are capping heating demand, UK physical supply is comfortable, and the prospect of diplomatic progress on the Middle East and potential US intervention on oil prices provide a ceiling. Wind generation is expected to improve from the second half of next week, which should ease gas-for-power demand and take some pressure off the prompt. The key risk remains the S-26 premium over W-26 and what it signals about the market's confidence in summer storage refill - if that spread persists or widens, forward pricing across gas and power will struggle to retreat meaningfully from current levels.