Gas Market
UK wholesale gas prices declined on Friday amid reports that, despite the recent re-escalation of hostilities between the U.S. and Iran, LNG tankers continued to transit the Strait of Hormuz. Vessels appeared to successfully pass through the Strait via the Iranian route, with the alternative Omani route at risk of being targeted by Iran. The reports helped to ease some of the risk premium that had built up in prices over the previous three days, with the front month contract shedding 3.64p day-on-day to settle at 117.19p per therm. The prompt market was similarly in decline as increasing wind generation levels mitigated gas-for-power demand, while near curve downside also provided some weight. The Day ahead contract fell by 4.25p to close out the session at 116.75p per term.
Power Market
Losses exhibited by the UK gas market on Friday due to easing tensions in the Middle East weighed on GB baseload contracts. The front month contract edged down by £1.15/MWh to settle at £102.25/MWh. Forecasts of lower wind output kept the prompt market elevated, as the day ahead contract posted a £0.46/MWh day-on-day increase to close at £117.92/MWh.
European carbon prices were steady on Friday, with little day-on-day movement ahead of the unveiling of the European Commission’s proposed ETs reform package expected later this week. A modest weakening across the wider energy complex provided some downside, with the Dec 26 EUA contract shedding 41 cents to settle at €79.31 a tonne.
Oil Market
Crude oil prices edged marginally lower on Friday as the recent re-escalation of tensions between the U.S. and Iran continued to stoke supply fears. Gains driven by news that Iranian armed forces launched attacks on U.S. military infrastructure in the Gulf region on Thursday were mitigated by reports that Qatari negotiators had arrived in Iran to meet officials, in an effort to de-escalate tensions. The lack of any new U.S. strikes on Iran overnight added further weight, with the front month Brent contract shedding 29 cents by the close to settle at $76.01 a barrel. The West Texas Intermediate (WTI) contract for August delivery ended the session at $71.41 a barrel, having declined by 67 cents day-on-day.
Markets this morning
Gas and oil markets have opened higher this morning amid heightened tensions in the Middle East after the U.S. bombarded Iranian targets over the weekend and Iran retaliating by attacking Bahrain, Kuwait and Jordan. Conflicting reports over the control of the Strait of Hormuz has added further upside, with Tehran declaring the Strait closed on Sunday, despite one Qatari LNG vessel successfully passing through over the weekend. The front month NBP contract last went through at 121.76p per therm, a gain of 4.57p on Friday’s close. Crude oil markets have had a similar response to the renewed hostilities that cast further doubt on the future of the U.S.-Iranian agreement signed last month. The front month Brent contract last went through at $78.26 a barrel, up 3.0% on Friday’s close.
