Energy Market Report - 18 March 2026
Energy markets saw broad selling on Wednesday morning despite the ongoing Iran conflict, as a sharp fall in carbon prices and milder UK weather softened near-term sentiment. A drone strike on the UAE's Shah gas field added a new layer of supply risk, though the immediate price reaction was muted.
Natural Gas
UK gas prices eased from Tuesday's settlement, with NBP day-ahead slipping to around 126.50p/therm as the system opened 26 mcm/day long and demand dropped to 188 mcm/day on warmer-than-seasonal temperatures. Wind dominated the generation mix at 49% on Tuesday, keeping gas-for-power burn low at just 5% from CCGT - though that is expected to reverse sharply over the next couple of days as wind speeds fall. LNG send-out remained steady at 49 mcm/day, with ten cargoes due into north-west European terminals this week, predominantly US-sourced. Norwegian nominations dipped to 312 mcm/day as annual maintenance at Aasta Hansteen began, removing around 20 mcm/day, though flows to the UK via Langeled and Vesterled edged marginally higher on the day. European storage sits just under 29% - roughly 6 percentage points behind last year - with Dutch levels particularly low at under 8%, prompting the grid operator to call for a strategic reserve. LNG arrivals into the UK have also slowed, with only nine cargoes in the first eighteen days of March versus fifteen at the same point in 2025. Further along the curve, front-season contracts slipped to around 123-125p/therm, but the more notable move was in the back end, where contracts beyond 2027 fell 5-7p/therm as the market increasingly views the conflict premium as front-loaded.
Electricity
UK day-ahead baseload jumped to £109.93/MWh on Tuesday - up nearly £23 on the day - with peak at £113.97/MWh, driven by a steep drop in wind during evening settlement periods and system buy prices touching £149.90/MWh during the morning. The spike was largely a within-day event; further out, Summer 26 baseload sits around £95-96/MWh and Winter 26 near £97-100/MWh, both broadly steady. Nuclear availability faces fresh pressure with Heysham 2-7 entering an unplanned outage from tomorrow, removing 315 MW and adding to existing planned outages at Torness, Heysham 1 and Hartlepool. With wind forecast to fade over the next two days, gas-for-power demand could rise to around 55 mcm/day on the day-ahead, keeping prompt baseload supported. However, the sharp fall in carbon is beginning to compress clean spark spreads on seasonal products, which could weigh on forward power if EUA weakness persists.
Other Commodities
Brent crude rose over $3 to settle at $103.42/bbl - up nearly 18% on the week - as the Strait of Hormuz remained effectively closed and coalition efforts to escort vessels through the strait made limited headway. Saudi Arabia has ramped up its East-West Petroline to reroute crude via the Red Sea, but pipeline capacity can only partially offset the disrupted flows. WTI followed at $96.21/bbl. Coal firmed with the broader complex, with ARA CIF Cal-27 at $128.15/tonne, up around 5.5% on the week. Carbon was the clear outlier, falling sharply after the EU signalled it may release additional allowances to contain emissions costs amid the fossil fuel price surge. EUA Dec-26 dropped 3.4% to €66.65/tonne - taking its weekly decline to over 8.5% - while UKA Dec-26 fell in sympathy to £37.11/tonne. EU talks on Thursday covering the Iran conflict and potential ETS reform will be closely watched.
Outlook
The Iran conflict remains the dominant force across the energy complex, with the drone strike on the Shah gas field and overnight retaliatory strikes on Tel Aviv reducing prospects for near-term de-escalation. However, the softer tone in Wednesday's early session suggests that milder weather, strong renewables and comfortable UK system balances are providing a counterweight to geopolitical risk - at least on the prompt. The key tension over the coming days sits between fading wind output, which should lift gas-for-power demand and support prompt prices, and the sharp weakness in carbon, which is beginning to erode margins further along the curve. European storage trailing last year by 6 percentage points and slowing UK LNG arrivals bear watching as the injection season progresses. Thursday's EU discussions on the ETS and broader energy policy response will set the tone heading into the end of the week.