Energy markets slide as Ukraine peace talks and strong supply weigh on gas and power

Gas Market

The NBP gas market extended its recent run of losses on Monday as traders continued to price in mild conditions and a comfortable supply outlook, with ongoing Russia–Ukraine peace negotiations adding a bearish geopolitical tone. Attention is now turning to President Putin’s meeting with US special envoy Steve Witkoff in Moscow on Tuesday afternoon, where he is expected to receive a revised 19-point peace framework drafted by US and Ukrainian officials over the weekend. The front-month Jan-26 contract settled 1.46p lower on the day at 73.83p/therm, marking its seventh consecutive session of losses; it is now down 8.64p/therm, or 10.45%, since Thursday 20th. On the prompt, NBP day-ahead fell 2.95p to 72.35p/therm, as a significantly milder weather outlook and strong supply from domestic production, LNG and Norwegian flows all contributed to a looser system balance.

Power Market

GB baseload power prices moved lower on Monday, with forward contracts pressured by softer gas markets and a comfortable supply outlook. Steady wind generation and milder temperatures weighed on prompt price forecasts for the week ahead. The front-month January contract fell £2.25 to £82.05/MWh, while the weekend contract on the prompt dropped 5.02% to £75.75/MWh. Carbon prices also eased, with the benchmark EUA contract drifting lower in a session marked by indecision. Correlation with gas was weak, but prices moved broadly in line with equities. After trading close to the opening level for much of the day, the Dec-2025 EUA contract settled at €82.64/t, down 0.7% on the previous session.

Oil Market

Oil prices rose more than 1% on Monday as geopolitical risks in both the Black Sea and South America unsettled the market. The new front-month Brent contract settled 79 cents higher at $63.17/bbl, a gain of 1.27% as Ukraine stepped up its military operations in the Black Sea, damaging two oil tankers bound for Novorossiysk and prompting the Caspian Pipeline Consortium, which carries around 1% of global oil supply, to halt operations at one of its three mooring points. Sentiment was further shaken after U.S. President Donald Trump declared that the airspace above and surrounding Venezuela should be considered closed, injecting fresh uncertainty around exports from the major producer. Against this backdrop, OPEC+’s decision to leave its output target unchanged for the first quarter of 2026 offered some reassurance, helping to steady expectations for supply growth in the months ahead.

Markets this morning

NBP gas prices are extending their losses this morning, with near-curve contracts down an average of 1.30p/therm. Day-ahead gas is trading around 72.45p/therm, down 0.40p/th, as steady Norwegian flows and healthy LNG sendout keep the system well supplied. Temperatures remain above seasonal norms and are expected to stay mild through mid-December. Wind output is forecast to ease over the coming days after a period of strong generation, although levels should still hold close to or above seasonal norms. Oil prices are holding firm on Tuesday as traders weigh the impact of Ukrainian drone strikes on Russian energy infrastructure and rising U.S.–Venezuela tensions. Front-month Brent is down 24c so far this morning at $62.93/bbl.