In Most of the UK's wholesale gas contracts experienced declines during September, with the exception of day-ahead contracts. However, there is still significant price risk associated with longer-term contracts due to continued uncertainty about future gas supply, as Europe adapts to reduced Russian gas imports ahead of the December expiration of the Ukraine transit deal. On average, seasonal gas contracts for winter 2024 to winter 2026 fell by 8.1% compared to the previous month. Notably, winter 2025 contracts held the highest average price at 97.75p/th in September. The movement in gas prices was shaped by competing market fundamentals, with day-ahead prices rising in the latter half of the month due to lower wind generation and below-average temperatures, which pushed up demand for gas in power generation and heating. Towards the end of September, unconfirmed reports suggesting that Ukraine had agreed to transit Azerbaijani gas to Europe stirred market volatility. These concerns were heightened by the looming end of the Ukraine-Russia transit agreement, and the potential for disruptions in US LNG output due to Hurricane Francine, which sent a bullish signal through the market. Since the EU relies heavily on US LNG, any disruption in supply could have a significant impact. However, the bearish influence of strong EU gas storage levels acted as a counterbalance to price rises, reinforcing supply confidence for the upcoming winter. Day-ahead gas prices rose 2.6% in September, averaging 86.30p/th. In contrast, front-month contracts saw a 10.2% decline, with October averaging 86.86p/th and November at 93.99p/th. The gap between front-month and day-ahead contracts also narrowed, after the premium in August diminished. Day-ahead power prices mirrored gas trends, climbing by 26.6% to an average of £78.05/MWh in September. The highest price of £92.94/MWh was recorded on September 2, driven by the shutdown of the 580MW Heysham nuclear reactor 1, combined with reduced wind generation. This tightening of system margins required more expensive power sources to meet demand. Despite these day-ahead price increases, seasonal power contracts for winter 2024 to summer 2026 recorded average losses of 7.3%. Front-month power contracts also fell, mirroring the gas market, with October and November 2024 prices down 9.8% to £73.25/MWh and £83.94/MWh, respectively.
