Jan25 Energy Market BriefForward Curve Contracts Recorded Gains

Throughout December, near-term power and gas contracts exhibited losses, while those further along the forward curve recorded gains month-on-month. This opposes what was seen in November when all tracked contracts registered gains, following the steady increase seen across UK power and gas prices since the middle of September.

Bearish market drivers arose across December, acting to suppress price rises from the bullish factors across the month. Particularly from an NBP gas point of view, levels of gas plant/field maintenance across both the UK Continental Shelf (UKCS) and Norwegian Continental Shelf (NCS) remained minimal – allowing a healthy volume of gas to reach the UK.

Across the first half of the month, December remained relatively mild, particularly in comparison to typical seasonal average, limiting national gas demand for heating and leading to price losses during this period.

As a result, day-ahead gas prices experienced a decline from the month previous, down 0.4% to average 111.41p/th – driven in part by milder weather in the first half of the month, lower demand, and stronger levels of renewable generation when compared to November. Front month contracts followed this trend, with January 25 and February 25 down 2.0% on average, with the contracts averaging 112.56p/th and 113.07p/th, respectively.

However, gas contracts were supported in part by supply concerns in the New Year, after an announcement by Vladimir Putin outlining that there would not be a new deal for the transit of Russian gas through Ukraine after the end of the deal on 31 December, restricting gas supply in Europe.

Because of this, contracts further out on the forward curve saw gains, with seasonal gas contracts from summer 25 to summer 27 2.6% higher in December when compared to the month previous. Summer 25 gas prices represented the highest average contract price in December at 106.94p/th – trading above the winter 25 contract price due to expectations of greater gas purchases to ensure storage facilities across Europe remain at an adequate level ahead of the winter 25/26 period.

Day-ahead power prices followed their gas counterpart lower in December,  down 6.2% on average to sit at £96.24/MWh. However, prices experienced notable fluctuations across the month, rising to the highest level seen since December 2022 at £192.50/MWh on 11 December.

During this period, GB experienced Dunkelflaute conditions, with wind making up less than 10% of the generation mix on 12 and 13 December alongside high demand. This increased reliance on more expensive gas fired generation, making up more than 70% of the generation mix on the same days. Shortly thereafter, prices fell lower as wind generation hit 22.4GW on 15 December, a new record at the time, followed by another record of 22.5GW, reached on 18 December.

The January 25 and February 25 front-month power contracts shared a similar price trend to that of their gas counterparts, dropping 1.9% on average to sit at £96.20/MWh and £97.07/MWh, respectively.

Seasonal power contracts observed gains in the month of December. From summer 25 to winter 26, these contracts rose by an average of 0.3% – with summer 26 the largest of the recorded gains at 1.1%.

Brent crude oil experienced downward price movements across the month, falling by 0.7% to average $72.95/bl due to various bearish fundamentals.

Price losses came from ongoing concerns around China’s weakening demand – fuelling concerns over future global demand, and news from OPEC+ postponing planned supply increases and extending their 2.2mn barrel per day output cut until the end of 2026, as current output cuts have had a lower-than-expected impact on the market.

Across the EU and UK carbon markets a mixed trend was seen, with the EU ETS carbon price rising 0.7% €68.02/t. However, the UK ETS registered a loss of 7.2% – to average £35.08/t in December which we can attribute, at least in part, to traders moving to the Dec-25 futures contract towards the end of the month.