Gas Market
UK wholesale gas prices declined cautiously on Wednesday amid reports that traffic via the Strait of Hormuz has picked up since the weekend. According to maritime intelligence, at least 172 vessels crossed through the strait since the U.S. signed an agreement to end the war, with several LNG cargoes heading into the Persian Gulf for loading. With no sign of a renewed escalation in the Middle East, and U.S.-Iran talks continuing, the front month contract shed 3.11p day-on-day to settle at 97.18p per therm. The prompt market was also in decline, driven by lower gas-for-power demand levels forecast over the coming days, as well as a well-supplied system. The Day ahead contract posted a 2.90p day-on-day loss to close at 98.60p per therm, while Within day fell by 1.25p to settle at 100.00p per therm.
Power Market
Weakness visible across the UK wholesale gas market led GB baseload curve products lower on Wednesday. The front month contract fell by £1.50/MWh to settle at £90.75/MWh, while the Winter 26 contract posted a £1.25/MWh loss to close at £94.90/MWh. Significantly high temperatures in the U.K. continued to elevate cooling demand levels, while increased wind production helped to ease upside along the prompt market. The Day ahead contract fell by 26.2% to close out the session at £115.34/MWh.
European carbon allowances ended Wednesday’s session relatively flat against their previous close, despite some intraday volatility. The Dec 26 contract increased by just €0.10 by the close to settle at €80.95 a tonne.
Oil Market
Crude oil prices dropped to their lowest level since before the start of the war in Iran on Wednesday as signs emerged that the rate of oil tankers transiting through the Strait of Hormuz was increasing. Ships have successfully sailed through the strait under a newly launched evacuation scheme by the United Nations, while Oman said it had designated two temporary routes north and south of the existing shipping lane to facilitate the safe passage of vessels leaving the region. The prospect of Iranian oil re-entering the global market and increasing short-term supply amid the temporary lifting of sanctions by the U.S. added to market weakness. Although uncertainty still surrounds the durability of the U.S.-Iran agreement, the front month Brent contract shed $3.34 day-on-day to settle at $73.74 a barrel, representing a decline of 8.5% since the start of the week.
Markets this morning
Crude oil prices are continuing their downward trajectory this morning as the prospect of increasing Middle East supply outweighs demand concerns. The front month Brent contract last went through at $72.43 a barrel, showing a decline of $1.31 on yesterday’s close. The NBP curve continues to take a more cautious approach to reducing geopolitical risk premium, with the front month contract trading at a 0.35p discount to yesterday’s close so far. With the supply and demand outlook for today and tomorrow largely unchanged, the Day ahead contract last transacted at 98.25p per therm, down 0.35p day-on-day.
