Gas Market
NBP futures continued to add premium on Friday as near months closed an average of 7.85p per therm higher. Wholesale gas prices have increased over week since the U.S. and Israel launched an attack on Iran last Saturday. The April contract has increased by 58.85p or 74.9% over the week as supply fears increase. The Strait of Hormuz is effectively closed as insurance companies have withdrawn insurance for shipping using the waterway through which around 20% of global oil and gas passes. On Friday the winter contract added 14.07p or 13.4% as the market now thinks the conflict could run longer than 4-6 weeks as indicated by Donald Trump earlier in the week. European gas storage levels have fallen below 30% and would normally be topped up over the summer months for the winter use but the current price spreads would not provide an incentive to boost gas reserves.
Power Market
Baseload power prices closed higher on Friday after another bullish session in the gas markets. While the front month closed flat, May and June added £1.50 and £1.45/MWh respectively. Since the conflict in Iran commenced last week, the April contract has gained £31.05/MWh or 43.5%. The summer contract added £2.00/MW on Friday, but it was the Winter contract that posted the largest gain on the day, settling £7.15/MWh higher at £94.90/MWh.
Forecasts for higher wind at the start of the week limited the upside to the prompt on Friday and the Day ahead closed at $117.17/MWh. Carbon EUAs eased slightly on Friday with contracts covering Dec-26 and Dec-27 settling at €70.30 and €72.52 per tonne respectively.
Oil Market
The escalation of the conflict in the Middle East continued to drive premium into crude oil prices on Friday. It was the seventh day of conflict between the U.S., Israel and Iran and Brent posted its largest one-day gain since March 22 just after Russia attacked Ukraine. The May contract for Brent settled at $92.69 a barrel on Friday, up $7.28 day-on-day but for the week was $20.21 a barrel higher. The effective closure of the Strait of Hormuz and the reduction of refinery activity in region have increased supply fears pushing prices to levels not seen since 2023. Donald Trump had originally hinted that the conflict would only last around 4-6 weeks, but the current prices are suggesting the market believes it could last longer.
Markets This Morning
Crude oil prices have broken through the $100 a barrel marker this morning having spiked at $119.50 a barrel. Brent peaked at $127.98 in the weeks following the Russian invasion of Ukraine back in 2022. World leaders are coming under pressure to release strategic oil reserves to cap oil prices. The latest price for the global benchmark is down $15.00 from today’s high with the last exchange for the May contract going at $104.50 a barrel. Israel stepped up attacks on Iran’s oil infrastructure over the weekend and LNG exports from Qatar remain shut in. NBP futures opened in bullish form with April peaking at 170.00p per therm, but last trades for the front month are 9.00 below that at 160.00p. The Summer contract last traded at 147.90p, up 21.05p from Friday’s close.
