Prices up again as conflict in Middle East and Ukraine steps up

Bullish sentiment remained strong on Thursday, with both the front-month and front-season contracts posting gains for the third consecutive session.

The return of active conflict across the Persian Gulf, alongside targeted strikes on infrastructure in Eastern Europe are serving as the primary sources of support, unnerving energy markets and erasing some of the confidence that was rebuilt over the past few weeks following the US-Iran ceasefire.

Ukraine has stepped up attacks on Russian energy assets, apparently striking 12 oil tankers overnight Wednesday, alongside frequent reports of Russian refineries being struck by drones.

A compressor station of the Russia-Türkiye Blue Stream natural gas pipeline was also struck yesterday, impacting the periphery of the European network and highlighting the persistent risks that the Russia-Ukraine war presents for energy security.

A steady decline in wind power so far this week has offered firm support to near-dated power prices, with a bullish wider energy complex lifting contracts further out.

Wind averaged at a rate of just 2.3GW on Thursday, keeping gas power demand unseasonally elevated at 12.4GW and prompting intervention from NESO, Great Britain’s System Operator.

As of yesterday morning, a EMN (Electricity Margin Notice) was in place, requesting that generators bring additional capacity online amid a forecasted shortfall in the hours 18:30 to 22:30, though this was dismissed just before 18:30.

NESO also notified participants of excessive balancing costs via SO-SO trades with France’s RTE. The cost of additional imports from France rose to 350/MWh overnight and will rise again to this level during daytime trade on Friday.

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Price commentary courtesy of Crown Gas and Power