February Energy Market Update

Market News

January 2026 was marked by elevated volatility across UK and European gas and power markets, which pushed prices to multi month highs, driven by a combination of colder‑than‑normal weather, tight storage levels, fluctuating Norwegian flows, and geopolitical uncertainty. While LNG supply remained generally robust, intermittent supply risks, particularly from US and rising Asian competition, added upward pressure.

The UK carbon market spent most of the month at multi‑year highs, supported by supply tightness and expectations of UK‑EU ETS linkage before easing slightly. Overall, the month saw persistent bullish fundamentals, and constant sensitivity to shifts in weather forecasts and geopolitical events. The start of February has seen some downward price re-correction, but they remain around 10% higher than at the start of the year.

Key Market Drivers

Key market driver	What happened	Price influence
Geopolitical tensions	Ukraine ceasefire negotiations continued with no breakthrough.	Down
	US–Iran tensions periodically raised fears over LNG disruption from the Middle East.	Up
	Broader geopolitical narratives (US/EU tariff threats over Greenland and Middle East instability) contributed to market volatility.	Up
Global supply/demand	Norwegian flows were generally strong but punctuated by outages that amplified risk premium.	Up
	US LNG freeze‑offs production cuts intermittently tightened the global LNG supply balance.	Up
	Asian LNG demand started to rise increasing competition for cargos.	Up
Weather-Related Demand Volatility	January delivered multiple cold spells across Europe, including the coldest period since early 2022.	Up
	UK/European temperatures frequently fell 2–4°C below normal, driving higher gas-for-power/heating demand. Further cold snap expected mid February.	Up
	Most of the US was hit by a winter storm, increasing internal demand and affected US LNG Production and exports to Europe.	Up
	Later‑month forecasts shifted milder, pulling prices lower but not alleviating structural tightness.	Down
EU Gas Storage	EU storage consistently ran 8–12% below last year, finishing the month around 44%, with predictions of levels hitting below 30% by the end of winter. This will result in a higher volume to be refilled before next Winter pushing Summer gas market prices higher.	Up
EU-UK carbon market linkage	The UK ETS saw persistent multi‑year highs due to auction pauses and EU‑linkage expectations.	Up
	A late‑month correction occurred as weather softened and investors reduced exposure.	Down
Non-commodity costs	New Network Transmission tariffs finalised with an average 60% increase seen for users for the charging year starting April 26.	Up
	Anticipated higher CfD and Capacity Market levies this year highlight rising cost pressure for UK consumers for the non energy proportion of bills.	Up

Outlook

As we enter February the price rise seen in January has started to fall back as geo-political concerns eased, and US LNG production started to return. However, prices movements will remain highly sensitivity to colder temperatures, LNG flows, Norwegian reliability, and geopolitical developments. Unless temperatures turn decisively mild and LNG supply remains uninterrupted; the underlying trend continues to lean toward sustained price volatility and supply and demand tightness.

Appendix 1

Final Tariffs for the Transmission Network Charging element within energy contracts (TNUoS) were published by the network operators on the 30th of January for the April start charging year. The final rates show an average rise of over 60% for most users.

Final Transmission charge yearly cost per meter type.

Band		2025/26	2026/27	Change	Change %
Domestic	Tariff - £ / site / year	£49	£81	£31.96	64.81
LV_NoMIC_1		£57	£87	£30.84	54.57
LV_NoMIC_2		£134	£214	£80.74	60.44
LV_NoMIC_3		£278	£453	£175.82	63.32
LV_NoMIC_4		£755	£1,263	£508.24	67.31
LV1		£1,426	£2,116	£689.74	48.36
LV2		£2,383	£4,202	£1,818.69	76.32
LV3		£3,742	£5,249	£1,507.27	40.28
LV4		£8,300	£13,936	£5,635.80	67.90
HV1		£7,968	£11,621	£3,653.17	45.85
HV2		£22,922	£42,761	£19,838.90	86.55
HV3		£44,455	£67,678	£23,222.43	52.24
HV4		£115,923	£193,053	£77,129.74	66.54
EHV1		£58,679	£118,799	£60,119.69	102.45
EHV2		£270,752	£423,174	£152,422.19	56.30
EHV3		£575,325	£917,220	£341,894.67	59.43
EHV4		£1,417,199	£2,079,911	£662,712.31	46.76