Geopolitical instability forces prices up to highest in 3 months

On Thursday, NBP gas prices surged to their highest levels in over 3 months, as geopolitical instability continued to upend the wider energy complex.

It remains unclear if the US intends to join its ally Israel in strikes against Iran, so a risk that the conflict could expand to include countries outside of the Middle East is being considered as a possibility at this time.

Limited Norway-UK exports likely served as a secondary source of support. Exports via the Langeled pipeline into the UK’s Easington terminal are less than half that of the same time last year, as Norwegian operators prioritise flows via other supply routes, to continental Europe amid firm cooling demand and slowing storage injections (data from Gassco).

Baseload power futures continued to rise in unison with the NBP, though to a lesser extent than their natural gas counterparts.

According to data from National Grid, gas-fired power generation stepped up over Wednesday and Thursday amid a drop-off in wind power. CCGT demand reached an average of 8.6GW (29.3%) on Thursday after wind turbine output fell to just 3.2GW (10.2%).

Imports from neighbouring countries such as France, Denmark and Norway averaged 5.6GW (15.3%) despite firm cooling-related demand in some areas of continental Europe.

Both gas and power prices have retraced this morning, but volatility is to be expected as geopolitical instability and supply issues evolve.

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Price commentary courtesy of Crown Gas and Power