Middle east tensions force wholesale prices up

Middle East tensions continued to escalate and drive gas prices even higher on Wednesday.

Material gains were posted across the entire curve, with the Winter 24 front-season contract managing to breach the 100p/therm psychological level, as geopolitical uncertainty helped to propel many contracts to their highest settlement since 25th June. Fears of a wider, prolonged conflict in the Middle East continued to underpin bullish sentiment.

Tensions between Israel and Iran are reaching boiling point following yesterdays reports that the top military leader of Hamas was assassinated in the Iranian capital of Tehran. Iran’s Supreme Leader, Ali Khamenei has vowed ‘harsh punishment’ against Israel whom Iran and the Hamas group have blamed for the attack. As proven by the barrage of strikes exchanged by Israel and Iran back in April, active conflict between the two countries also has the potential to spook global energy markets so its no surprise that European hubs are on high alert on the back of recent events.

Unplanned capacity restrictions may have served as a secondary source of support for contracts across the near-curve. Data from Norwegian state-owned operator Gassco shows that ‘process problems’ took 10.8mcm offline at
the Sleipner field along with a power failure that curtailed output from the Duva, Gjøa and Vega fields at a rate of 7.2mcm/day although the latter has since been resolved as of today.

This morning, gas prices continue to edge higher with the new September 24 front-month contract currently being offered circa 1.5p/therm (0.05p/kWh) higher when compared to its previous settlement, at time of writing.

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Price commentary courtesy of Crown Gas and Power