22 October 2026

Weekly Energy Market Update 

Outlook

European energy markets have been highly volatile this week, reacting to conflicting headlines from the Middle East. Oil and gas prices fell significantly on Tuesday afternoon following reports of renewed mediation efforts involving Iran and Pakistan’s army chief in Tehran, alongside President Trump’s decision to ease certain sanctions and tariffs on Russian energy exports. However, prices recovered within hours as subsequent reports suggested Iran remained unwilling to negotiate with the US until certain conditions were met. Tensions have since escalated further, with renewed Houthi attacks on Saudi Arabia and overnight reports that four vessels involved in oil transfers were struck and caught fire in the northern Persian Gulf, while another three hit mines west of the Strait of Hormuz. Brent has climbed back to $112.00/bbl, while Summer 27 gas has traded within a 14.00 p/th range this week, currently trading at 171.00 p/th.

 

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General Context
Rise

UK inflation rose to 3.5% in September, its highest level in 11 months, driven by higher petrol and diesel costs. Government borrowing reached £24.52bn, exceeding expectations and pushing public debt above £3tn, adding to concerns over the fiscal outlook ahead of next week’s Budget.

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Meanwhile, the UK labour market showed tentative signs of stabilisation, with unemployment edging down to 4.7% in the three months to August, while regular wage growth accelerated to 3.7%.

Oil

Brent crude climbed to a five-month high of $112.70 following continued attacks on Gulf shipping and drone strikes on Saudi Aramco’s Shaybah field. While Saudi production remains unaffected, the attacks reinforce concerns over regional supply security and the growing vulnerability of energy infrastructure, with diplomatic negotiations at a deadlock.

Russian diesel exports are beginning to recover following the temporary suspension of US sanctions and the lifting of Moscow's export ban, with cargoes heading towards Turkey and Brazil, its two largest diesel buyers since 2023.
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Gas & Power
Gas

The UK government has approved production at the Jackdaw gas field in the North Sea, with first gas expected by the end of the month. Peak output is estimated at 4.9 million cubic metres per day, equivalent to around 3% of UK gas demand. While a welcome addition, Jackdaw will primarily offset declining North Sea production rather than significantly increase net supply.

Gas

The Dutch government has allocated up to €1 billion to state-owned EBN to purchase up to 80 TWh of gas to help meet its storage target ahead of winter 2027-28. Dutch storage is currently 64.7% full, holding 93 TWh compared with 103 TWh a year earlier.

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European day-ahead power prices are falling sharply as storm Austen approaches, with German baseload dropping from €208.44/MWh for delivery on Monday 19th October to currently trading below €20.00/MWh for Sunday. Strong wind generation is expected to persist until mid-next week, before declining output and potentially colder temperatures push prices higher.

Current Prices
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UK Gas (NBP) - Rolling 12-Month Average
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Sustainability Spotlight

UK Battery Storage System set to be one of the largest in Europe

Construction has been completed on Ørsted’s first large-scale UK battery energy storage system (BESS), located alongside the onshore converter station for Hornsea 3.

The project features 170 megapacks with a combined capacity of 600 MWh, equivalent to the daily electricity consumption of 80,000 UK homes. It is expected to become one of Europe’s largest battery storage systems.

The system will store surplus renewable electricity when generation exceeds demand, releasing it when demand increases. Ørsted says this will help maximise renewable energy use, improve grid stability and reduce electricity costs, marking a significant milestone in the UK’s energy transition.
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