Gas Market
After spending much of the session trading above Friday’s close, UK wholesale gas prices dropped back late in the afternoon amid reports that talks between the U.S. and Iran had progressed positively. A tenuous start to the ceasefire over the weekend following an announcement from Tehran that the Strait of Hormuz was again closed pushed the front month contract to an intraday high of 103.50p per therm. Reports of an explosion at Qatar’s Ras Laffen LNG facility, caused by a technical malfunction, which could delay the recovery of LNG production in the region, added further support. However, following the emergence of reports that progress had been made in talks between U.S. and Iranian officials on Monday, and that the strait was in fact open, prices began to decline. The July 26 contract ended the session at 99.94p per therm, down 1.12p day-on-day. Near-curve losses, coupled with warmer weather forecasts, weighed on the prompt market, with the Day ahead contract shedding 1.15p by the close to settle at 101.60p per therm.
Power Market
Losses exhibited across the UK gas market on Monday weighed on the GB Baseload market. The front month took the brunt of the losses, with July 26 declining by £2.40/MWh to settle at £92.40/MWh. In contrast, the prompt market was supported by forecasts of higher temperatures which are expected to drive up cooling demand, while wind and solar generation levels are set to remain stable. Day ahead settled at £120.46/MWh, representing a day-on-day gain of 23.3%.
European carbon allowances were driven higher late in yesterday’s session by strong options hedging activity. The Dec 26 contract settled at its highest level in more than 4 months to close at €81.60 a tonne. In contrast, UK allowances fell amid reports that the long-awaited EU-UK summit to discuss market linking would be postponed due to the resignation of the British prime minister.
Oil Market
Reports that progress had been made in talks between the U.S. and Iran, and that the Strait of Hormuz was open, weighed on crude oil prices on Monday. Threats by U.S. President Donald Trump to restart the war, coupled with Tehran’s announcement that the strait was again closed, pushed the market higher in early trade, with the front month Brent contract reaching an intra-day high of $82.30 a barrel. However, comments made by U.S. Vice President JD Vance that suggested talks between high-ranking U.S. and Iranian officials on Monday had been positive alleviated the recent upside. The August 26 Brent contract shed $2.67 day-on-day by the close to settle at $77.90 a barrel. Meanwhile, the front month West Texas Intermediate (WTI) contract closed at $73.86 a barrel, representing a day-on-day decline of $2.70.
Markets this morning
Yesterday’s late decline has continued into this morning, with gas and oil markets displaying day-on-day losses so far. Signs of progress in restoring crude and LNG flows through the Strait of Hormuz following U.S.-Iran peace talks has weighed on prices, with the NBP front month contract last going through at 99.45p per therm, down 0.49p on its previous close. Similar weakness has also been exhibited on the prompt market, with the Day ahead contract most recently observed at 101.15p per therm, down 0.45p day-on-day. News that the United States granted Iran a 60-day sanctions waiver to allow the sale of Iranian crude oil across the globe has also added downward pressure, with the August 26 Brent contract down by 40 cents so far to last transact at $77.50 a barrel.
