Volatile day on the wholesale market amid rapidly unfolding geopolitical developments

Wednesday marked a volatile day at the NBP driven by rapidly unfolding geopolitical developments.

Rumours of a draft peace proposal circulated by Iranian state media in the morning triggered an initial sell-off; however, this downswing was curbed by a US rebuttal in the afternoon, which explicitly dismissed the framework as a ‘complete fabrication’ reinjecting risk premium into the curve.

Short-term supply and demand fundamentals are strong. Above average temperatures are weighing on short-term demand forecasts, and the British system was oversupplied throughout yesterday’s session.

Norwegian flows continue to ramp back toward pre-maintenance levels and UKCS production is holding steady. Though with that said, low regional storage levels are serving as a persistent, underlying source of pressure.

The power curve kept a narrower holding pattern than gas on Wednesday, with the market likely eyeing relatively steady generation fundamentals buoyed by consistent solar output and warm weather.

According to data from Elexon, metered solar generation has averaged close to 5GW so far this week, meeting up to 40% of GB power needs during the afternoon and reducing the need for expensive balancing actions by the system operator.

The Brent Crude (European) benchmark contract closed 5.3% lower day-on-day after initial reports of a draft peace framework prompted an even deeper, more rapid sell-off than was seen on gas or power markets.

Oil and its refined products have seen the biggest physical disruption from the blockade of the Strait of Hormuz.

A weak link exists between gas, oil and carbon prices, as well as financial markets, so some of crudes volatility is potentially contributing to the volatility we have seen on the NBP recently.

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Price commentary courtesy of Crown Gas and Power