Gas Market
The UK wholesale gas market reacted cautiously on Wednesday to the news that Donald Trump had extended the ceasefire between the U.S. and Iran. Despite the extension, Washington confirmed that its blockade of Iran-linked shipping would remain in place until Iranian leaders submit a “unified proposal”. Ongoing reports of vessels being fired upon in the Strait of Hormuz, along with Iran’s seizure of at least two cargo ships, lent support to prices. Meanwhile, Trump’s suggestion that a second round of peace talks could begin on Friday did little to curb upward momentum. The front month contract gained 3.32p by the close to settle at 108.44p per therm. In contrast, the prompt market traded sideways, as strength in the near curve offset downward pressure from recovering Norwegian flows following the scaling back of maintenance at the Troll gas field. The Day ahead contract shed 0.38p day-on-day to close out the session at 106.13p per therm.
Power Market
The extension of the ceasefire between the U.S. and Iran limited the gains exhibited by UK power markets on Wednesday due to the persistent risk around supply disruption. The front month UK Baseload contract moved marginally up by £0.80/MWh to settle at £88.90/MWh. Seasonal contracts saw more modest gains, while the prompt market was supported by weak wind generation forecasts. The Day ahead contract rose by 20.2% day-on-day to settle at £93.84/MWh.
European carbon prices extended their losses across Wednesday’s trading session as they weakened for a third day in a row. Although activity was limited as participants waited for further news of peace talks in the Middle East, Dec 26 European Allowances shed €1.19 to settle at €74.31 a tonne, while the EUA spot slipped €1.32 to finish the day at €72.98 a tonne.
Oil Market
Crude oil prices settled above $100 per barrel for the first time in over two weeks on Wednesday following reports of gunfire hitting container ships in the Strait of Hormuz. At least three vessels were fired on as they attempted passage through the strait, while Iran’s Revolutionary Guards Navy seized two ships for what it described as maritime violations. With peace talks lacking progress despite the extension to the ceasefire, concerns over the fragility of the geopolitical situation in the Middle East and the ongoing closure of the Strait of Hormuz continued to support the market. The front month Brent contract increased by $3.43 by the close to settle at $101.91 per barrel. Meanwhile, the West Texas Intermediate (WTI) contract for June delivery closed at $92.96 a barrel, posting a day-on-day gain of $3.29.
Markets this morning
UK gas prices are trading higher once again this morning following a lack of progress in talks between the U.S. and Iran and as both nations maintain restrictions on the flow of trade through the Strait of Hormuz. The front month contract last went through at 112.44p per therm, up 4.00p on yesterday’s close. The prompt market is so far quiet, although direction is likely to be flat, with cooler weather forecasts offsetting stronger Norwegian and UKCS flows. Crude oil prices maintain their level above $100 as concerns grow around the lack of progress towards the full reopening of the Strait of Hormuz. The front month Brent contract last went through at $103.87, up $1.96 on its previous close.
