ENERGY MARKET UPDATE – 27th April

Geopolitical tensions in the Middle East have driven fluctuations in the UK energy market, reflecting its response to global events.

UK gas and power prices experienced fluctuations throughout the week, but towards the end of last week and the beginning of this week, volatility began to subside. The earlier gains were reversed, resulting in losses ranging between 3% and 5% week on week across the curve. Factors such as temperatures below seasonal norms, lower wind generation, and Freeport LNG operating near zero capacity due to unplanned maintenance contributed to a negative supply outlook. Heightened tensions in the Middle East, particularly amid reports of a potential Israeli attack on Iran, added to market apprehension. However, as details clarified and the attack appeared less severe, it triggered a sell-off towards the end of the week.

Yesterday, prices for the upcoming seasons opened lower than Friday’s settlement and continued to decline throughout the day, registering losses of approximately 3% to 4% compared to Friday’s close.

Oil prices also experienced volatility due to ongoing hostilities in the Middle East. However, as Iran signaled no further plans for retaliation, the market began to stabilize, closing the week just below $87.30 per barrel, lower than the week’s starting point of $90/bbl. Today, the market opened at a similar level to Friday, currently trading at $87.19/bbl.

UK Carbon prices initially showed some upward movement but reversed course during the week, closing just above £35/tnCO2. This week, prices are on the rise again, with today’s opening at £36.30/tnCO2.

EU Carbon followed a similar trajectory, closing the week just under €69/tnCO2. This week, there has been a slight reduction, with the current trading price at €66.49/tnCO2.

The market this week appears to be refocusing on fundamental supply factors, as both Iran and Israel appear to be seeking to avoid further escalation. Forecasts indicate temperatures below seasonal levels and a decrease in wind generation. However, there are some positive developments, such as the resumption of operations at Freeport LNG and increased Norwegian flows following the resolution of an unplanned outage.

Barring further escalations in the Middle East and significant changes to supply fundamentals, a more stable week is anticipated, with prices expected to ease back down and recover from recent gains in the energy market.