Market Report January 2026

Despite very high gas demand and strong short-term power prices at the start of the month, gas prices for January and beyond have fallen sharply. Mild and windy forecasts for the rest of the month, together with hopes that ongoing peace talks could potentially increase Russian energy exports in the near future, have reinforced an already positive outlook, further driven by expectations of higher LNG supply exports in the coming months. The gas forecast for contracts starting in Summer 26, for instance, has dropped nearly 7% since the start of the year, continuing an attractive buying opportunity, especially given relatively low gas storage levels in the UK and across Europe, and the risk that peace negotiations may take longer than the market currently anticipates or indeed not come to fruition at all!

European power grids have come under significant pressure this month, as weather-driven demand surged across Europe causing electric prices climbed to an 11-month high in the UK. Gas storage levels have also been affected, however, despite these supportive fundamentals, long-dated gas contracts are still trading slightly below pre-Christmas levels. This divergence highlights the scale of the expected increase in global LNG supply and reflects market confidence that European gas storage sites will be comfortably replenished over the spring and summer. This outlook should hold, barring any further geopolitical disruptions or unexpected supply outages.

The ongoing European cold snap is driving very strong withdrawals from European gas storage facilities, which are currently 58.0% full, lower than seen at the same point last year. While such conditions would typically lend support to increasing prices, the expectations of a significant year-on-year increase in LNG imports have so far capped the upside.

IN OTHER NEWS:

British retailers reported the sharpest deterioration in confidence in 17 years – with sales extending their decline amid persistently soft demand, as households remain cautious in their day-to-day expenditure.

Tories warn of blackouts as experts defend renewables rollout – Shadow Energy Secretary Claire Coutinho has claimed the UK’s renewable energy rollout is increasing the risk of electricity blackouts.

Eurozone inflation edged down to 2% in December – reaching the ECB’s target for the first time since summer and reinforcing the case for interest rates to remain steady in the near term.

EU countries paid Russia more than EUR 7bn for around 15m tonnes of LNG last year – with imports dominated by cargoes from the Yamal project. French ports handled 6.2m tonnes, followed by Belgium with 4.2m tonnes and Spain with 2.8m tonnes. Meanwhile, the European Parliament approved a provisional text on 17 December to phase out Russian LNG by the end of this year and pipeline gas from autumn 2027, moving the measure closer to becoming binding.

Trump pulls plug on climate treaties – Donald Trump has ordered the United States to withdraw from dozens of international bodies, ripping the country out of large parts of the global climate and governance system. Nearly half of the 66 organisations affected are linked to the UN, including the Framework Convention on Climate Change, the legal backbone of international climate action.

Sustainability Spotlight: EU CBAM officially enters into force – From the 1st January, EU importers of high-carbon products must comply with a new carbon border levy, under the bloc’s Carbon Border Adjustment Mechanism (CBAM). The levy applies to carbon-intensive goods including aluminium, cement, electricity, iron, steel and fertilisers. The CBAM aims to prevent carbon leakage, creating a level playing field with foreign competitors, while simultaneously encouraging decarbonisation.