Market Structure: Extreme Backwardation & The Procurement Trap in UK Energy Markets

Fix Now or Wait? The Procurement Trap Facing Energy Buyers Today

The forward curve is currently exhibiting Extreme Backwardation, creating a complex decision-making environment for energy buyers.

20+ Years Experience

A trusted industry leader working for a diverse range of commercial customers.

20+ Years Experience

A trusted industry leader working for a diverse range of commercial customers.

20+ Years Experience

A trusted industry leader working for a diverse range of commercial customers.

ENERGY CONSULTANCY OF THE YEAR 2025

Publish Date:

April 1, 2026

Market Structure: Extreme Backwardation & The Procurement Trap

The forward curve is currently exhibiting Extreme Backwardation, creating a complex decision-making environment for energy buyers:

  • Front-End Loading: Prices for the upcoming Sum-26 and Win-26 are trading significantly higher than the 2028 and 2029 seasons.
  • The Data: * Sum-26: ~136p/therm
       
    • Win-26: ~140p/therm
    •  
    • Sum-28: ~70p/therm
  •  
  • The Strategy: Businesses signing 12-month fixed contracts now are "locking in" the peak of the war volatility. For many, a flexible  procurement strategy or short-term "bridge" contracts may be preferable to avoid long-term exposure to these emergency rates. However, a longer-term flexible contract framework, allows you to take advantage of those lower priced future seasons right now!

How Can Advantage Help? 

Our sustainability department continue offer an ever-increasing range of products and technology aimed at reducing energy consumption and associated costs as well as driving down carbon emissions. We will of course continue to keep you updated around these initiatives, but please do reach out to your designated point of contact should you wish to explore your options in this regard.

In terms of procurement, we will of course continue to monitor markets with a view to helping customers navigate the unprecedented circumstances and ascertain when constitutes the best time to seek a contract extension.

Our popular flexible procurement options continue to be an option for an increasing number of clients on either a standalone basis or as part of a grouped basket. This often facilitates access today/month ahead trading markets which have proved to be particularly beneficial to many clients over the winter period.

BULLISH IN Q2

  • IRAN WAR AND GEOPOLITICAL FALLOUT

  • COMPETITION FOR LNG

  • LOW EUROPEAN STORAGE

  • POLITICAL & ECONOMIC INSTABILITY AND UNCERTAINTY  

  • RUSSIA/UKRAINE WAR

RANGEBOUND IN Q2

  • VOLITILITY & UNCERTAINTY

  • CARBON

  • OIL PRICES

BEARISH IN Q2

  • MILD SUMMER START

  • WHOLESALE FUTURES PRICES – 2028 & BEYOND

  • TRUMP’S TARIFFS

  • PROSPECT OF CEASEFIRES

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