Ben Brading 6 min read

How trading and pricing in the wholesale gas market works

Wholesale gas prices have a major influence on energy costs in Britain. They are a key driver of household heating bills and business gas bills. When gas prices rise sharply, as they have over the past few years, the effects ripple through the economy, increasing living costs and putting pressure on businesses.

Natural gas isn’t just used directly by consumers; it also fuels a significant share of British electricity generation. As a result, movements in the gas market have a direct impact on domestic and business electricity prices.

This guide explains the structure of the UK wholesale gas market, how trading takes place, and how prices are formed. Here’s what we cover:

What is the wholesale gas market
Where the UK’s gas supply comes from
Wholesale gas market participants
How the National Balancing Point (NBP) works in the gas market
Types of wholesale gas market trading
National Balancing Point (NBP) gas pricing

What is the wholesale gas market

The wholesale gas market is where natural gas is bought and sold in bulk before it reaches homes and businesses.

The market enables gas producers, importers, traders, shippers, and suppliers to buy and sell gas on the national gas grid (called the National Transmission System, or NTS).

Wholesale gas is traded at the National Balancing Point, a virtual hub where all gas entering or leaving the NTS is exchanged and priced.

The wholesale market allows domestic and business gas suppliers to secure gas purchases in advance enabling them to offer fixed-rate tariffs, providing greater certainty to their customers.

Where the UK’s gas supply comes from

To understand how the wholesale gas market works in Britain, it’s important to understand the different gas sources injected into the NTS.

Each of these sources sells the gas they inject onto the gas grid via the wholesale gas market.

For each source, we’ve used the latest 2024 published government natural gas statistics to show its contribution.

Domestic production

2024 contribution: 50%

The vast majority of Britain’s domestically sourced gas comes from 283 active offshore gas fields in the North Sea.

Production in the North Sea has steadily declined for around 20 years. The best gas fields were discovered and developed in the 1960s and 1970s, and have gradually reached the end of their productive lives.

The remaining fields are operated by large energy companies such as Shell, BP, and TotalEnergies, who use pipelines to transport natural gas to shore, where it is fed into the National Transmission System.

Domestic production also includes small-scale anaerobic digestion plants using the green gas support scheme.

Pipeline imports

2024 net contribution: 33%

Britain has become increasingly dependent on importing natural gas from its European neighbours to make up for the decline in North Sea gas production.

Importing gas via undersea pipelines is the cheapest way to transport natural gas between countries.

In 2024, Britain imported 345,000 GWh and exported 118,000 GWh of natural gas through interconnecting pipelines.

Pipeline imports of natural gas come from the following interconnectors:

Interconnector	From	To	Direction	Approx. Capacity (bcm/year)
Interconnector UK	Zeebrugge, Belgium	Bacton, England	Bi-directional	~20.0
Balgzand Bacton Line	Balgzand, Netherlands	Bacton, England	Bi-directional	~15.0
Langeled Pipeline	Nyhamna (Ormen Lange), Norway	Easington, England	Import-only	~25.5
Vesterled Pipeline	Heimdal Riser Platform, Norway	St Fergus, Scotland	Import-only	~12.0
FLAGS	Northern North Sea fields (UK sector)	St Fergus, Scotland	Import-only	~20.0

LNG imports

2024 contribution: 16%

Liquefied Natural Gas (LNG) is a method of transporting natural gas globally by ship. It is a highly flexible source of gas, providing an alternative when gas on the British and European markets is expensive.

The gas is cooled to -162°C, turning it into a liquid, reducing its volume by about 600 times and enabling it to be transported in tanks.

Britain has three LNG terminals where it can regasify the LNG from ships and feed it into the National Transmission System:

South Hook LNG – Milford Haven, South Wales
Dragon LNG – Milford Haven, South Wales
Isle of Grain LNG – Kent, South East England

The majority of LNG imported into Britain in recent years has come from the US and Qatar. Find out more in our guide to the role of LNG in the UK.

Wholesale gas market participants

Above, we’ve explained the importers and producers that sell gas onto the wholesale market. In this next section, we’ll outline the other key market participants who buy and sell gas.

Gas shippers

A gas shipper is a formally licensed role in the wholesale gas market. These private businesses arrange natural gas movement through the National Transmission System (NTS).

Shippers manage the movement of gas from import terminals and the North Sea to the following exit points:

Gas power stations connected directly to the NTS
Industrial users connected directly to the NTS
Regional gas distribution networks that connect to local homes and businesses

Shippers trade on the wholesale gas market to purchase gas to meet their delivery obligations and to maintain a balance between their imports and exports each day.

Gas suppliers

Gas suppliers are entities licensed by Ofgem to sell gas to individual homes and businesses.

They use the wholesale gas market to purchase the gas their customers consume, by:

Buying gas from importers, producers, and traders
Paying shippers to deliver the gas to the relevant regional gas networks

Examples of gas suppliers include British Gas for business, Drax Business Energy, and E.ON Business Energy.

Gas traders

Gas traders buy and sell gas from other market participants, but are not themselves shippers or suppliers.

They follow their own trading strategies in an attempt to generate profit from price movements or to manage pricing risk on behalf of clients.

The market benefits from the activity of traders, as they increase trading volume, making it easier for other parties to buy or sell gas.

Gas storage facilities

Gas storage facilities can temporarily store gas in salt caverns or depleted gas fields.

A gas storage facility uses the wholesale gas market to purchase and store gas when prices are low, then sells it and returns it to the grid when prices rise.

Find out more in our guide to natural gas storage in the UK.

How the National Balancing Point (NBP) works in the gas market

A fundamental aspect of trading on the wholesale gas market is the National Balancing Point (NBP), a virtual location where all gas trades are settled. This greatly simplifies the trading of natural gas.

Instead of gas contracts defining a specific place where gas will be delivered, they simply state that the gas will be delivered at the NBP.

The NBP allows buyers to export gas anywhere on the grid and sellers to import gas anywhere on the grid.

This section explains the key processes of balancing and settlement that enable all market participants to trade at the National Balancing Point.

Balancing supply and demand on the NTS

The system operator, National Gas, is responsible for balancing supply and demand on the National Transmission System (NTS).

National Gas continually trades at the National Balancing Point to ensure the gas grid remains at the correct pressure.

By maintaining the correct pressure across the NTS, market participants can import or export gas anywhere on the grid.

The system operator keeps the gas grid in balance by continuously carrying out balancing activities. Here are two typical examples of how this works:

Gas pressure is too low due to a cold snap

During cold weather, households across the country use more gas to keep their properties warm. As more gas is consumed, pressure on the gas grid falls.

To correct this, National Gas purchases gas on the wholesale market for immediate delivery at the NBP to increase pressure.

Gas pressure is too high due to windy conditions

During windy weather, UK wind farms generate all the electricity the country needs. As a result, gas power stations are paused and do not consume any gas. An unexpected pause in consumption increases pressure on the gas grid.

To correct this, National Gas sells gas on the wholesale market for immediate delivery at the NBP to reduce pressure.

Settlement at the NBP

Settlement is a daily process that works alongside the balancing activities carried out by National Gas.

It calculates how much of the system imbalance is caused by individual shippers.

The process compares the contracted purchases (imports) and sales (exports) of each shipper to determine their imbalance as follows:

Gas input (delivered) minus Gas output (withdrawn)

Shippers who are not balanced are charged or credited using prices that reflect how much National Gas had to pay for its balancing activities on that day.

The settlement process provides a strong incentive for shippers to keep their purchases and sales balanced each day, helping to maintain grid stability.

National Balancing Point (NBP) gas pricing

NBP pricing forms the foundation of the UK wholesale gas market. It provides a transparent, central reference point for the price of natural gas across virtually all types of gas trading.

Because most wholesale gas trades occur at the NBP, it allows the pricing of all trades to be easily compared.

Types of NBP wholesale gas prices

The key types of NBP pricing are as follows:

NBP spot price – The price for gas traded for same-day or next-day delivery
Day-ahead Index – A benchmark price for gas delivered tomorrow (the most referenced short-term price)
NBP forward curve – A series of forward prices for the delivery of gas over future months or seasons
NBP future settlement – The final price for specific standardised future contracts, reported daily
System buy/sell prices – The prices used to calculate shipper imbalance charges

Sources of NBP wholesale gas price data

The table below outlines the key sources of NBP wholesale gas price data.

Source Type	Access
ICIS, Argus, Platts	Subscription-based reports and dashboards
ICE Futures	Public settlement prices (delayed or via API)
OCM/ICE Endex	Real-time trade reporting (for members), historical data
Broker Platforms	Subscription or industry-access terminals
News Outlets	Summarised NBP price trends (e.g., Reuters, Bloomberg Energy)

Types of wholesale gas market trading

Unlike the wholesale electricity market, trading on the gas market is less structured.

Because gas is storable and compressible within pipelines, it allows for greater flexibility and less need for second-by-second balancing or highly structured trading arrangements.

In this section, we’ll explain the three key methods by which trading takes place on the wholesale gas market.

Over-The-Counter (OTC) trading

OTC trading involves a contract between two market participants, either directly or through a broker.

The contracts used in OTC trading are not standardised and define bespoke delivery dates, volumes, and prices.

The most common types of OTC trading are:

Spot – Delivery for today or tomorrow to fulfil short-term physical delivery requirements.
Forwards – Delivery for weeks or months in the future, used by suppliers to lock in prices.
Swap – Financial trades (with no physical gas delivery) used to exchange price exposure between two parties.

ICE (Intercontinental Exchange)

The Intercontinental Exchange (ICE) is an electronic futures exchange where participants trade standardised gas contracts. It is the main venue for trading standardised agreements at the National Balancing Point.

The ICE exchange enables public trading of the following types of contracts:

Futures – Standardised contracts for the delivery of gas in monthly, quarterly, or seasonal future periods, with gains and losses settled daily.
Standardised forwards – Longer-dated contracts for the delivery of gas, settled only at contract expiry.
Options – Agreements that give the right (but not the obligation) to buy or sell gas at a fixed price by a set date, used to hedge against price volatility.