Energy Markets Rally as Gas, Power, Carbon, and Oil Prices Strengthen on Supply Constraints and Geopolitical Risks

Gas Market

NBP gas prices firmed on Monday, supported by forecasts for lower wind output and ongoing maintenance at Norwegian facilities. The front-month October contract rose 3.13p to 81.02p/therm, while the Day-Ahead gained 4.03p, or 5.3%. In wider developments, Hungary is preparing to sign its longest-ever Western gas supply deal, potentially signalling reduced reliance on Russian contracts. At the same time, the EU is working closely with the U.S. on its first coordinated sanctions package against Russia amid intensified attacks on Ukraine. The IEA also projected that 2026 will bring the largest boost in global LNG supply since 2019, while China’s LNG demand is expected to ease as domestic output and Russian pipeline flows increase. The impact of these increases is expected to be felt mostly in gas prices during the second half of the year as US project are completed as soon as the end of 2025.

Power Market

GB baseload power prices strengthened on Monday, following gains in the gas market. The front-month October contract climbed £3.10 to £76.50/MWh, while the Day-Ahead rose 10.7% to £88.00/MWh amid reduced wind generation. Carbon markets also extended their rally, with EUAs breaking above their mid-year peak to a seven-month high and UKAs setting a fresh 26-month high. The benchmark Dec-25 EUA settled €1.17 higher at €77.17/tonne, while the 2025 UKA gained £0.85, or 1.5%, to £56.91/tonne.

Oil Market

Oil prices edged higher on Monday, recovering some of last week’s losses after OPEC+ announced a modest production increase. While the group signalled plans to raise output further from October, the hike came in below market expectations and is likely to have limited impact given that several members are already over-producing, meaning much of the additional supply is already in circulation. Front-month Brent crude settled 52 cents higher at $66.02/bbl. Prices also found support from geopolitical risk, as U.S. President Donald Trump suggested he was preparing a second phase of sanctions on Russia, raising the prospect of tighter restrictions on Moscow’s crude exports amid the ongoing war in Ukraine.

Markets This Morning

NBP gas markets opened slightly softer this morning, with the front-month down 0.82p at 80.2p/therm and Winter-25 nearly a penny lower at 86.75p/therm. The system opened 4 mcm short as reduced Norwegian flows from ongoing Langeled maintenance, combined with cooler temperatures, lifted demand in the UK and Europe. However, wind generation is forecast to increase later this week, reaching levels around 20% above average, which should help ease gas-for-power demand. Oil also extended its gains on Tuesday, supported by OPEC+’s smaller-than-expected output hike and concerns over potential new sanctions on Russia. Brent crude was last seen up 49c at $66.51/bbl.