Gas Market
NBP curve prices retraced much of the losses of the previous three sessions on Wednesday following an abrupt and fruitless end to peace talks between Russia and Ukraine. Escalating tensions between Iran and the United States added further upside, as Washington positioned military assets within striking distance of Iran and reports surfaced of Iranian naval drills in the Sea of Oman. The heightened standoff raises the risk of a potential closure of the Strait of Hormuz, a critical maritime chokepoint through which circa. 20% of global gas supplies flow. Despite ending the session at a 5.28p premium to its previous settlement, the front month contract was still 6.1% lower than at the start of the month. Meanwhile, the curve gains fed into an incline across an otherwise stable prompt market. Robust Norwegian supplies into the UK as well as a fall in domestic demand negated further upside from an increase in gas for power demand, with the Day ahead contract increasing by 4.25p to close at 76.75p per therm.
Power Market
GB Baseload curve products increased on Wednesday, tracking the upward trajectory of the NBP gas market. The front month contract posted a day-on-day gain of £3.00/MWh to settle at £73.00/MWh while the Summer 26 contract increased by £2.53/MWh to end the session at £67.78/MWh. Prompt gains were more modest, with lower wind output levels being offset by weak continental European power markets. The Day ahead contract increased by just £1.16/MWh to settle at £76.26/MWh.
European carbon markets increased for a second consecutive session on Wednesday, driven by a bullish wider energy complex. A further reduction in speculative trade volumes did little to ease the upside, with net long positions declining by less than expected. European Allowances for Dec 26 gained €1.43 day-on-day to settle at €71.52 a tonne.
Oil Market
Oil prices rose on Wednesday to settle at their highest close of the month so far, driven by heightened geopolitical tensions. With peace talks between Russia and Ukraine ending abruptly and without a breakthrough yesterday and tensions between Iran and the U.S. escalating, concerns over potential supply disruptions were rife. Notably, it was reported that Iran had plans to conduct navy drills in the Sea of Oman, increasing concerns over a possible closure of the Strait of Hormuz, a vital shipping channel for oil supplies, while the U.S. military is assembling further hardware within striking distance of Iran. The front month Brent contract settled at $70.35 a barrel, an increase of $2.93 day-on-day and up 6.1% since the start of the month. The WTI contract for March delivery posted a day-on-day gain of $2.86 to close out the session at $65.19 a barrel.
Markets this morning
Energy markets have continued to gain ground this morning amid concerns of a potential U.S.-Iran conflict. The front month contract last went through at 81.11p per therm, up 4.70p on yesterday’s close. Prompt gains are more modest, with the Day ahead contact posting a 2.78p day-on-day gain following its most recent trade. Warmer and windier weather conditions forecast for the coming days should help to mitigate the upside. Crude oil markets have also edged up, buoyed by the geopolitical unease. The front month Brent contract last went through at $71.07 a barrel, a day-on-day gain of 72 cents.
