The Story: Signal vs Noise
This week presented a textbook example of why traders distinguish between spot panic(day-ahead prices) and structural signals(forward contracts). The story matters enormously for your renewal strategy.
What Spot Did (The Noise)
Day-ahead gas crashed 9.8% over the week (76.92p avg → 69.27p avg). Day-ahead power fell 5.4% (75.87£ → 71.79£). The cause was clear: temperatures fell 3–4°C below seasonal normal mid-week (coldest on Wed 12th), driving heating demand and forcing more gas-fired generation. Monday was mildest (76.25p gas); Wednesday was coldest (63.10p gas); Friday recovered partially (68.50p gas).
What Forwards Did (The Signal)
Calendar year contracts barely moved. Cal-26 gas fell only 1.12% (78.36p → 76.77p). Cal-26 power fell 0.20% (75.47£ → 75.32£). This is the critical insight: traders didn't believe the spot crash represented a structural shift. They priced the cold as temporary and supply as adequate to meet incremental demand.
This Week Day-by-Day: Spot Tells the Story
| Day | Gas Day-Ahead (p/th) | Power Day-Ahead (£/MWh) | Context |
|---|---|---|---|
| Mon 10 Nov | 76.25 | 81.39 | Mild to start. Still elevated from prior week. |
| Tue 11 Nov | 70.50 | 75.18 | Temperature began dropping. Demand easing slightly. |
| Wed 12 Nov | 63.10 | 68.62 | COLDEST DAY. 3–4°C below seasonal normal. Heating demand surged. Spot cratered. |
| Thu 13 Nov | 68.00 | 63.53 | Cold persisted but demand moderated slightly. Market pricing cold as short-lived. |
| Fri 14 Nov | 68.50 | 70.22 | Bounce. Market expected warm recovery. Forward-looking traders moved in. |
Weekly Averages (10-14 Nov):
Gas: 69.27 p/th(vs 75.87 p/th prior week = -8.75% WoW)
Power: 71.79 £/MWh(vs 68.02 £/MWh prior week = +5.5% WoW)
The gas decline was steep but reflects temporary demand destruction from mild + record LNG arrivals. Power rose because wind forecasts weakened, requiring more gas-fired generation despite warmer start and cold mid-week.
Three-Week Trend: Context Matters
Understanding this week requires looking back. Here's what the market was experiencing:
The trend was down before the cold hit. LNG supply was already driving prices lower (75.87p in week 3). The cold didn't reverse the trend; it accelerated it temporarily (69.27p in week 10). But forwards held at 76–78p, suggesting traders saw this as a dip, not a direction change.
The Disconnect: Spot Crashed 9.8%, Forwards Fell 1.1%
This is the core insight for your strategy. When spot and forwards move differently, forwards are the signal. Here's why:
Spot (Day-Ahead) = Emergency Balancing
Today's market clears imbalances minute-by-minute. Weather surprises (cold snap Wed), transmission constraints, renewable volatility—all hit spot immediately and dramatically. Week-10 spot ranged 63.10p (Wed) to 76.25p (Mon) = 21% intraweek range.
Forwards (Calendar Contracts) = Structural Expectations
Calendar contracts are about what the market expects over weeks/months. Cal-26 ranged 76.77p (14 Nov) to 78.36p (10 Nov) = 2.1% intraweek range. Forwards move 1/10th the range of spot because they're not about today's surprise; they're about six months ahead.
The Gap = Your Protection Value
When you lock a Cal-26 contract at 76.77p, you're paying a 7.5p premium over Wed's spot (69.27p). That premium is your insurance against the 63p-to-76p swings that happen. It's not wasted money; it's protection you bought.
If You Had Locked Monday vs Friday
The market message: Forwards trend downward slightly (78.36p → 76.77p) but held above spot panic (69.27p). This tells us supply is adequate but demand softness is real. Don't chase the spot collapse; lock when forwards stabilize.
What Moved Prices This Week
❄️ Cold Snap (Temporary)
3–4°C below seasonal normal Wed 12 Nov. This drove spot demand surge and heating fuel panic. But forecasts showed return to normal by end of week. Market priced this as event , not trend.
🚢 LNG Arrivals (Structural)
10+ cargos confirmed for week. US, Senegal, Algeria sources. Norwegian production ramping post-maintenance. Storage at 83% (healthy). Supply was abundant—more abundant than demand increase from cold. This kept forwards anchored.
💨 Wind Forecast Weakness
Wind output expected below seasonal next week. This explains why power day-ahead rose (+5.5% WoW avg) even as gas fell: more gas-fired generation needed. But supply covers it; no shortage signal.
📊 Demand Destruction
Week 3 (75.87p) to week 10 (69.27p) price collapse was largely mild weather + oversupply working through. When cold hit, it should have lifted prices. It did on spot (63p intraweek). But forward market said "temporary"—and it was right.
When Should You Renew?
Today is 17 November 2025. Your renewal window depends on when your contract ends. Use these forward-looking timeframes to guide your strategy.
Before Feb 2026: Lock now (heating demand is real, limited time). Mar–May 2026: Lock by mid-Dec (capture easing before suppliers tighten). Jun+: Wait until Feb (supply trend is your ally). Follow the pattern, not the panic.
What to Watch Next Week
The Week in Summary
Signal (Forwards): Cal-26 fell 1.12%, suggesting mild structural easing as LNG supply remains strong and demand softens seasonally.
Noise (Spot): Day-ahead crashed 9.8% mid-week on cold snap (Wed 12 Nov), then recovered as market priced cold as temporary.
Implication: Don't chase spot volatility. Follow forwards. The market separated the event (cold) from the trend (easing supply). You should too.
Your Action: Dec-25 renewals: lock defensible value this/next week. Q1-26: monitor one more week. Cal-26: let it ease for 3 weeks. The trend is your friend.
