Reports that Israel were unlikely to target Iranian energy infrastructure led to falling gas prices

Gas Market

Spurred on by positive murmurings emanating from Israel that they were inclined not to target Iranian oil and nuclear infrastructure some of the “war” premium that had fed into gas prices began to fall out across Tuesday’s session. The front month contract shed 4.20p/th in early trading before settling at 98.8p/th, a day-on-day decline of 2.06 pence. Fundamentally the situation on European markets remains positive with supply remaining strong, demand falling as temperatures rise and European storage facilities over 95.1% full. As a result, the bearish tone was not only consigned to the near curve, with Q1-25 shedding 1.93p/th. The front season, Summer-25, was also in decline, falling to 94.64p/th but still remains at a considerable premium to the summer-24 outturn price of 79.21p/th.

Power Market

The weakness on the NBP filtered through to GB Baseload power futures as all contracts posted day-on-day losses. Forward contracts for 2025 fell by an average of £1.37/MWh tracking the losses on the NBP while also being pressured by early losses on the carbon markets. Day ahead baseload power prices tumbled on Tuesday as forecast wind output ramped up. Wind output is now expected to reach 11.9GW, 20% above seasonal norms. Poor EUA auction results in the morning saw carbon contracts fall in conjunction with the falling European gas markets. The Dec-24 contract fell to an intra-day low of €64.17/tonne before rebounding, tracking European gas price higher. The contract settled at €65.03, a decline of 84 cents from Monday.

Oil Market

Oil declined by over 4% following reports in the media that Israel had heeded the US’ advice and agreed to not target Iranian oil infrastructure. The Washington Post reported that Prime Minster Netanyahu confirmed that Israel would target military targets and not nuclear or oil infrastructure.  Prices were also pressured by a cut this week in forecast global oil demand by both the IEA and OPEC+ with China the main driving force behind the forecasted reduction. As a result, the Brent front month contract declined throughout the session, increasing marginally before the close as the contract settled at $74.25 a barrel, its lowest point since the beginning of the month as the contract retreated below the 50-day moving average.

Markets this morning

NBP gas prices have opened relatively flat this morning. The contracts that have traded have done so at a slight premium to Tuesday’s close. The UK system is 11 mcm short at this early despite strong Norwegian flows and high wind speed. The spot contract has yet to trade, while the Day ahead contract has exchanged hands at a 2.00p/th premium. Wind speeds are expected to fall again tomorrow which is supporting gas for power generation demand and supporting prices. Crude oil is also flat in early trading, with the latest executed trade marginally lower than last night’s close. EUA carbon is the biggest mover this morning with the Dec-24 contract 1.3% lower than Monday’s settlement.