Energy Markets Volatile as Strait of Hormuz Tensions Escalate

Market Update:

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• Wholesale prices dropped significantly on Tuesday following overnight 'calming' comments by President Trump.
• This morning, gas prices have opened higher. Front gas seasons up 5-8% at time of writing.
• Yesterday oil dropped from highs of $94.6 to $84.55/bbl. Current price is around $91/bbl
• Overnight oil prices recovered some ground, likely on news of Iranians beginning to lay mines in The Strait of Hormuz, setting further barriers to resumption of shipping. The U.S. have eliminated 16 Iranian mine-laying vessels.

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NATURAL GAS:

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Gas prices have opened higher this morning, trading upwards during early trading following losses on Tuesday.

The front month contract across all European hubs have posted gains this morning, with TTF climbing back over €50/MWh at time of writing (up ~€4/MWh) and NBP pushing back towards 130p/therm, a gain of around 10/12p/therm compared to yesterday.

A story from the Netherlands as Gasunie, the Dutch Natural gas grid operator, urged the government to build a strategic gas reserve to ensure the Netherlands can cope with a prolonged disruption to supplies.

Energy markets came under pressure on Tuesday as President Trump claimed the war wouldn’t last much longer and that action would be taken to secure safe passage for commercial transport through the Strait of Hormuz. Overnight, the situation has escalated, with the US military claiming to have destroyed 16 mine laying vessels operating in the Strait and 3 commercial vessels had been damaged. Once more this fuels bullish momentum with the likelihood of supply tightness lasting more long term.

Temperatures continue to hold above seasonal norms in all countries in North Western Europe, with Germany most mild against averages. This is to be short lived with temperatures set to reduce into the weekend, as cooler air takes control.  

Brent Crude continued to lose value as the G7 leaders stated that they’d look to take action to curb price increases linked to the conflict in Iran, however they stopped short of agreeing a plan and instead asked the IEA for an assessment of the current situation.

ELECTRICITY:
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Power contracts fell sharply on Tuesday with losses witnessed across all near and long term contracts, mirroring moves seen across gas and Brent Crude markets. The main driver coming from comments from President Trump who claimed the war in Iran would not last much longer, seemingly reducing longer term risk to markets.
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The German baseload Apr-26 contract lost €8/MWh moving to the lowest price in over a week with similar losses posted on the quarterly products. Q4-26 moved down by €11/MWh tracking The gas prices down. These losses were present on all hubs, with UK Apr-26 falling £12.75/MWh.
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Carbon EUA prices moved upwards on Tuesday, likely supported by fuel switching for heat generation as commodity prices turned lower.
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In the UK, 600MW Heysham 2 Nuclear plant has begun ramping up today, following an outage since 2nd March set to reach full capacity by tomorrow. This will help to offset increased demand over the weekend as temperatures are set to return to seasonal with wind generation dropping off.
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Brent Crude continued to lose value as the G7 leaders stated that they’d look to take action to curb price increases linked to the conflict in Iran, however they stopped short of agreeing a plan and instead asked the IEA for an assessment of the current situation.

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Latest Price:
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                        BID                      OFFER

Sum-26:           £92.1                  £92.95

Win-26:             £92                   £95

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Latest Gas & Power Annual Chart:
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