Gas Market
UK NBP gas contracts settled lower on Tuesday after U.S. President Trump said he had asked Israeli and Hezbollah representatives to de-escalate hostilities in Beirut, with both sides agreeing to stand down. The news came after a series of social media posts on Monday in which Trump expressed frustration at the pace of peace negotiations. Markets responded positively, though cautiously, with the front-month July contract shedding 4.30p to settle at 114.79p/therm. The day-ahead fell a further 5.75p to 115.75p/therm, as a loosening supply balance was compounded by very low gas-fired power demand on the back of strong wind generation. On the supply side, natural gas flows from the Gulf fell by nearly 9 bcm in May, equivalent to around 45% of EU demand that month. While the disruption is profoundly altering short-term market dynamics, new LNG supply from other producers is providing a meaningful buffer. Non-Gulf LNG volumes surged 20% year-on-year in May, adding almost 8 bcm to the market and offsetting around 90% of the losses attributable to Hormuz disruption.
Power Market
GB Baseload July closed down £2.50 at £101/MWh, with a 4.30p/th fall in NBP gas outweighing a £0.95/t rise in spot UK ETS allowances. On the prompt, the day-ahead contract fell £27 to £96/MWh. Last week’s exceptional heat has given way to cooler conditions, with low pressure bringing rain and strong winds. Winds are forecast to turn unseasonably strong toward the end of the week, pushing daily metered wind output to a weekly high of 11.2GW on Thursday.
The front-December EUA contract settled 0.4% higher at €79.50 after a mixed session, with traded volume just above 18Mt. Prospects of a UKA-EUA market linkage are increasingly seen as a supportive factor for EUA prices, with closer alignment between the two systems expected to improve liquidity and reduce fragmentation across European carbon pricing regimes.
Oil Market
Oil prices climbed about 1% to a one-week high on Tuesday in volatile trade, as markets watched for developments in the Iran conflict. Front month Brent rose $1.02, or 1.1%, to settle at $96.00 a barrel. Iran is reviewing a proposed deal with the U.S. to halt the war but had not communicated with Washington for several days, according to Iranian media. U.S. President Donald Trump, however, said negotiations had continued without interruption. Adding to upward pressure, the head of the IEA’s oil industry and markets division warned that global oil inventories could hit critical levels ahead of the peak summer demand period if stock draws continue at their current pace. Fuel demand typically rises during the Northern Hemisphere summer as people drive and fly for the holiday season.
This Morning
UK wholesale gas contracts are trading higher, with the front-month up 4.17p at 119.21p/therm, as fresh Gulf escalation clouds the outlook for a peace deal and the reopening of the Strait of Hormuz. Reports of an Iranian missile strike damaging Kuwait’s airport and U.S. military action near the Strait have rattled markets. Supply concerns are compounded by a strike at Inpex Corp’s Ichthys LNG export terminal in Australia, which accounts for around 2% of global LNG output. Brent crude is also higher, up $2.36 at $98.36/bbl, tracking the same escalation news. Carbon EUAs have also made gains with the Dec-26 contract up 79c at €80.29/tonne.
