On Thursday, wholesale gas and electricity prices both dropped significantly as a result of tentative ceasefire and peace negotiations relating to the conflict in Iran.
Prices remain significantly higher for one-year contracts than they are for two- and three-year contracts. This is reflected in the wholesale market, where one-year pricing is about 50% higher than pricing from Summer 2027 onwards.
As the conflict calms down, we expect to see prices reduce, driven by the fact that Qatar will be able to export gas.
On the generation side, the price last week was down by around 10% compared with the previous week, which is encouraging. Renewables were up to 44.5%, driven by the fantastic weather we have been having. However, due to the vagaries of the UK system, whereby the price is set by the most expensive input to the grid, even if it accounts for only 1% of production, the generation price is driven by gas prices. That is why it remains above £100 per megawatt-hour, broadly double what we were seeing earlier in the year.
As the conflict in Iran hopefully calms down, we expect to see significant reductions in these prices.
| Gas: Gas prices fell yesterday. Iran and Oman are in talks to reopen the Strait of Hormuz for shipments. The US has issued sanctions against Iranian maritime insurance providers that collected fees on the Strait crossing. In the prompt, high temperatures continue to threaten nuclear curtailment in France. British wind generation is well below seasonal norms at 5.7GWs/day. Prices have continued to soften this morning. Power: Power prices also fell yesterday, pressured by declining oil and gas markets. Temperatures are forecast above average for the remainder of this week and next week, which is likely to boost cooling demand. Prices have softened further in the early window. Oil: Oil prices settled lower yesterday as Saudi Arabia proposed plans to lead a maritime coalition of defence around the Red Sea, with 14 countries issuing a joint statement in support. These countries included Egypt, Pakistan and Turkey. Prices have continued to fall in the early trading window as supplies flowed through the maritime chokepoints. Oil prices have currently gained 20% this month. Carbon (EUAs): The ICE Dec-26 traded to €81.29/t yesterday. The contract opened this morning at €81.88/t. Carbon (UKAs): The ICE Dec-26 fell to £59.24/t yesterday. Opening this morning at £59.65/t. |
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