A summary
After the sustained price declines seen through summer 2025, that softer trend continued into early winter. Across the forward curve – from summer 2026 through to winter 2028 – gas prices fell by around 14%, while power prices eased by just over 3%. On the surface, this pointed to a calmer market.
In reality, volatility never went away.
Price movements over this period were driven by a familiar but powerful mix of factors: milder early-winter weather reducing demand, strong and reliable Norwegian supply, and record global LNG exports keeping the market well supplied. Together, these forces pushed prices to their lowest levels since 2022 and gave the impression of relative stability.
However, since the turn of the year, market dynamics have shifted again. Colder weather across Europe has driven demand above the five-year average, carbon prices have reached record highs, and geopolitical risk has moved back into sharp focus. As a result, the forward curve has flattened, with the market moving away from clear backwardation towards a much tighter structure. This change matters, as it signals growing uncertainty around future supply and pricing.
Weather has been a key catalyst. While winter began mildly, early 2026 brought a sharp Arctic cold spell, quickly tightening supply-demand balances and pushing prices higher. With longer-range forecasts pointing to the potential for prolonged cold into February, storage withdrawals have accelerated. Although La Niña is weakening, it is still contributing to ongoing variability, keeping short-term weather risk firmly on the table. Further into 2026, a shift towards El Niño could bring more stable conditions, but near-term volatility remains likely.
Storage dynamics are adding another layer of risk. Gas withdrawals have been running well above seasonal norms, even with LNG send-out remaining strong. While prices have not reacted as aggressively as in previous years – reflecting confidence in global LNG supply and new capacity coming online – warning signs are emerging. The inversion of the summer-winter spread in January highlights market concern over the ability to refill storage later in the year, particularly if cold conditions persist and storage levels fall further towards 50%.
The LNG market has been central to this winter’s story. Weak Asian demand and record export volumes pushed global prices lower late in 2025, while U.S. gas prices surged on colder domestic weather. Europe has absorbed a significant share of U.S. LNG, underlining its growing reliance on American supply as Russian LNG is phased out. More recently, falling U.S. prices and delays at new export facilities have added uncertainty, reinforcing the need for careful risk management.
Beyond gas and power, the wider energy complex remains volatile. Oil prices fell sharply last year due to oversupply and weaker demand, but geopolitical tensions continue to pose upside risk. Meanwhile, carbon markets are tightening, with record EU and UK prices increasingly feeding into power generation costs and long-term energy pricing.
For businesses, the message is clear: while prices may appear more settled, the underlying risks haven’t gone away. Weather, storage, LNG flows, carbon and geopolitics can all shift the market quickly, making a clear, proactive energy strategy essential.
