Gas Market
UK wholesale gas prices remained above last week’s lows on Tuesday, as the escalation of hostilities between the U.S. and Iran over the weekend continued to underpin a geopolitical risk premium. Reports that U.S. officials were due to travel to Doha this week to continue discussions on the memorandum of understanding between the two countries did little to ease recent gains. Sentiment remained cautious after it emerged that the talks would be more technical and that there would be no direct high-level meeting between the U.S. and Iran, limiting expectations for meaningful progress and reducing the likelihood of substantive talks. The new front month contract, August 26, increased by 1.89p day-on-day to settle at 104.45p per therm. On the prompt, near curve strength mitigated downside momentum from a decline in gas-for-power demand amid high wind and solar production this week. The Day ahead contract posted a 2.18p increase to close out the session at 105.35p per therm.
Power Market
Strengthening UK gas prices observed on Tuesday supported the GB Baseload curve. The front month contract inclined by £1.75/MWh day-on-day to close at £95.00/MWh, while the Winter 26 contract posted a £1.75/MWh gain by the close. On the prompt, a downward shift in gas-for-power demand forecasts weighed on prices, while temperatures remained flat. The Day ahead contract fell by £19.83/MWh, or 16% day-on-day to settle at 104.06/MWh.
Monday’s losses across European carbon markets were reversed yesterday after a European politician dismissed media reports on potential ETS reform measures as “fake news”. Dec 26 EUA’s increased by €0.77 to settle at €80.00 a tonne.
Oil Market
Crude oil prices were little changed on Wednesday, with a modest decline nudging contracts towards their biggest monthly and quarterly losses since early 2020. Markets remained tentative to the potential talks between officials from the U.S. and Iran in Doha this week amid what remained a strained interim ceasefire and continued uncertainty surrounding the Strait of Hormuz. The front month Brent contract shed just 23 cents day-on-day to settle at $72.92 a barrel, while month-on-month this settlement represented a 20.8% drop. Over the quarter, Brent was down 38.4%, which was the largest quarterly decline since falling by a record 66% in the first quarter of 2020 due to Covid-19 demand destruction. Meanwhile, the West Texas Intermediate (WTI) contract for August 26 delivery shed a more meaningful $1.25 day-on-day to close out the session at $72.92 a barrel.
Markets this morning
UK wholesale gas prices are largely unchanged so far this morning, with little movement to the geopolitical outlook driving the sideways momentum. The August 26 contract last went through at 104.53p per therm, up just 0.08p on yesterday’s close. Lower gas-for-power demand levels are weighing on the prompt market, with the Day ahead contract last observed at 105.02p per therm, a decline of 0.86p day-on-day. Crude oil markets have also moved lower as talks between the U.S. and Iran aimed at reaching a final agreement to end their war continued, while tanker traffic through the Strait of Hormuz continues to recover. The front month Brent contract last went through at $71.91 a barrel, down $1.01 on its previous close.
