Cooling tensions in the Middle East help reduce wholesale prices

Gas prices plunged into the weekly close on Friday, pressured by cooling tensions in the Middle East.

Geopolitical risk premiums receded after the US cancelled scheduled overnight military strikes on Iran in favour of diplomatic discussions, easing market concerns over further Middle Eastern supply disruptions.

Over the weekend, the US and Iran signed a non-binding memorandum of understanding to pause hostilities and keep diplomatic channels open, though a formalised peace treaty remains unsigned.

This tentative progress has been enough to sustain bearish sentiment, allowing UK wholesale gas prices to continue their downward trajectory on Monday morning.

Baseload power prices also moved lower on Friday, though to a lesser extent than adjacent natural gas and crude markets.

This muted response followed a week of remarkably steady domestic generation fundamentals.

When comparing last week (8th to 14th June) to the week prior, wind’s share of the generation mix softened only slightly from 34.8% to 33.1%, while gas-fired generation (CCGT) held virtually flat at 22.8% compared to 22.7% in the previous week.

With generation steady, a 1.9% decline in overall system demand over the same period helped to ease pressure along the near-curve.

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Price commentary courtesy of Crown Gas and Power