Gas and Power Prices Surge Amid LNG Delays and Record Heat

20th August 2026

UK wholesale gas and power markets are under significant pressure this week. In late June, Winter 26 gas sat at 3.51p/kWh and Winter 26 power at 9.48p/kWh. By 14 August, those contracts had repriced to 5.17p/kWh and 12.60p/kWh respectively, a roughly 47% surge in gas alone over just five weeks. The drivers behind the move, continued geopolitical risk in the Middle East, extreme global heat, and weakening European gas storage, show no sign of easing.

Further out on the curve, seasons beyond 2028 remain more stable for now, with Summer 29 gas still around 2.12p/kWh. But that relative calm is eroding quickly. Week-on-week, every single contract on the forward curve is moving higher, which means the opportunity to lock in lower prices on longer-dated contracts is shrinking in real time. For energy buyers watching these moves accelerate, the parallels with the early stages of the 2022 crisis are becoming difficult to ignore.

Echoes of the 2022 Ukraine Invasion Energy Crisis

In early 2022, the invasion of Ukraine triggered a price spike, followed by a period of uneasy calm while markets waited for a resolution. Then came summer heatwaves and a critical supply disruption at the Freeport LNG facility in the US. Prices escalated rapidly from there.

In 2026, the sequence is running along eerily similar lines. US strikes against Iran in late February triggered an initial move. A period of negotiation followed, where markets remained relatively calm. Now, this week marked the expiry of the 60-day memorandum of understanding signed between the US and Iran, an agreement that was supposed to provide a framework for negotiations around the Strait of Hormuz and Iran’s nuclear programme. No material progress has been reported, Israel has already escalated military activity in the region, and the outcome over the coming days is genuinely uncertain. Any furthered deterioration will be priced into energy markets immediately. In 2022, the calm that buyers waited for never arrived and prices kept climbing. Those holding off in 2026, hoping for a similar window, are making the same bet.

Beyond the immediate geopolitical uncertainty, specific supply disruptions are adding to the pressure. A Qatari LNG export facility expected to come online around October 2026 has been delayed by the regional instability. Meanwhile, a Norwegian gas field under maintenance has extended its restart period from the end of September to the end of February 2027. The gas volume lost is 1 BCM, equivalent to roughly 10 LNG cargoes. Neither disruption is catastrophic in isolation. Together, and layered on top of an already strained market, they are amplifying risk significantly.

Record Is Straining Energy Supply Across the Board

July 2026 was the joint-warmest month on record globally, and a strengthening Super El Niño is increasing the likelihood that 2027 will be even hotter. The UK recorded its highest temperature of the year at approximately 38.1°C in west London on 13 August, while France has seen highs at or above 40°C earlier in the season.

The consequences for energy supply are running through multiple channels simultaneously. French nuclear output has been curtailed because river temperatures are too high for cooling water. Hungary has shut down around 75% of its nuclear fleet for the same reason. Low water levels on the Danube and the Rhine have restricted coal barge movements to power stations. In the US, above-normal heat has increased domestic gas burn for power generation, reducing the volume available for LNG export. Asian markets, particularly Japan, South Korea and China, are competing for the same cargoes to meet their own cooling demand, and higher spot prices in Asia are pulling vessels eastward. The result is a market being squeezed on both sides: less generation capacity available, and more demand drawing on what remains.

The storage picture reinforces the concern. EU gas storage levels for 2026 are tracking below every year since 2022. The expectation had been that summer injection would rebuild stocks ahead of winter, but sustained cooling demand has diverted gas away from storage. Current trajectories suggest Europe may not meet its November storage targets. If storage enters winter at low levels, the replenishment cycle pushes into Summer 2027, placing further upward pressure on prices well into next year. On 1 January 2027, a full ban on Russian LNG imports into the EU takes effect. That removes another source of supply at a point when the market can least afford to lose it.

Traders’ View

The window for securing competitive rates is narrowing. Near-term contracts have repriced aggressively and will remain volatile while geopolitical and weather risks persist. However, prices further along the curve still carry lower risk premiums, and the market remains in backwardation, meaning longer-dated seasons are priced below the front.

For businesses with upcoming renewals, longer-term contracts still offer a way to offset today’s elevated front-season pricing with materially lower rates further along the curve. However, that opportunity lasts only as long as backwardation holds, and buyers who wait for clarity risk finding the window has already closed.

Our trading desk is actively managing positions through this period. If you want to discuss your exposure or review your procurement strategy, contact us at [email protected].

FAQ:

Why have UK gas and power prices increased so sharply?

Three main factors are driving the increase simultaneously. Middle East tensions have disrupted LNG supply timelines and introduced significant geopolitical uncertainty. Record global heat has reduced power generation capacity in Europe while increasing demand for cooling. And European gas storage is falling behind injection targets, raising concerns about winter readiness. The 47% surge in Winter 26 gas and 32% rise in Winter 26 power, over the past five weeks, reflect the weight of these factors bearing down on the market simultaneously.

How are LNG delays affecting European energy prices?

Europe depends heavily on LNG imports to meet its gas demand, particularly since the loss of Russian pipeline supply after 2022. When LNG projects are delayed or cargoes are diverted elsewhere, it directly reduces the volume available to European buyers and pushes prices higher. Currently, a Qatari LNG export facility expected to begin operations in October 2026 has been delayed by regional conflict, and a Norwegian gas field producing approximately 1 BCM annually has entered extended maintenance until February 2027. At the same time, increased cooling demand in Asia is pulling spot LNG cargoes eastward, tightening the global market further.

Why is extreme heat putting additional pressure on energy markets?

Extreme heat affects energy markets on both sides of the equation. On the supply side, high river temperatures force nuclear plants to reduce output because cooling water exceeds safe operating thresholds. France and Hungary have both curtailed nuclear generation for this reason. Low water levels also restrict barge movements on rivers like the Danube and the Rhine, limiting coal deliveries to power stations. On the demand side, widespread air conditioning use increases electricity consumption. In gas markets specifically, hotter weather in the US increases domestic gas burn for power generation, leaving less available for LNG export to Europe.

How could low European gas storage affect prices during winter 2026–27?

Gas storage acts as a buffer that allows Europe to meet winter heating demand without relying entirely on real-time imports. If storage enters winter below target levels, the continent becomes more exposed to supply disruptions and cold snaps, because there is less cushion to absorb unexpected demand. That vulnerability gets priced into forward contracts as a risk premium. Additionally, if winter draws storage down to very low levels, the refill cycle extends into Summer 2027, which means upward price pressure carries over beyond the winter season itself. The incoming ban on Russian LNG imports from 1 January 2027 compounds the problem by removing supply at the point when storage is most likely to be under strain.

How is the current energy market similar to the 2022 crisis?

The structural pattern is what makes the comparison compelling. In 2022, an initial geopolitical shock (the invasion of Ukraine) was followed by a period of relative calm while markets expected a resolution. That resolution never came, and when summer heatwaves hit alongside a major LNG supply disruption at the Freeport facility in the US, prices escalated sharply. In 2026, the sequence has followed a similar path: an initial geopolitical shock (US strikes against Iran in February), a period of negotiation, and now an expiry of diplomatic frameworks alongside extreme heat and fresh supply disruptions. The concern is not that the two situations are identical, but that the same type of compounding risk is present and building.

What does backwardation mean for business energy buyers?

Backwardation is a market structure where contracts for delivery in the near future are priced higher than contracts further out. For energy buyers, this matters because it means that locking in a longer-term deal right now can bring the blended rate down significantly. The near-term seasons carry a higher risk premium due to current volatility, but seasons two or three years out are still priced at materially lower levels. A longer contract averages across both, resulting in a lower overall rate than fixing for just one or two seasons. The risk is that if current market pressures persist, the cheaper outer seasons will reprice upwards too, and the blending advantage will diminish.