Wholesale gas and electricity prices dropped markedly on Monday, by up to £10 per megawatt-hour for electricity and over 11p per therm for gas.
These are exceptional reductions; however, we expect them to be short-lived, as hostilities recommenced overnight on Tuesday.The impact is particularly pronounced on near-term contracts, while further out there is more stability.
This is pushing people towards longer contracts, which we are nervous about.Historically, geopolitical issues such as these have passed after a number of months, and the market has then returned to normal.
For certainty, it is worth locking in for longer, but if you feel that the situation will be resolved within the next six months, it may be worth considering a more proactive and pragmatic strategy.
| Gas: Gas prices softened significantly yesterday alongside the pause in hostilities between the US and Iran. In the prompt, low renewables and high temperatures curtailing French nuclear supply, meant potential demand for gas limited further declines. Prices have softened further in the early window. Power: Power prices tracked the wider energy complex and fell sharply yesterday. Prices have continued to fall this morning. Oil: Oil prices continued to fall yesterday after the US abruptly suspended air strikes over Iran, raising hopes of a diplomatic solution. Despite the pause in conflict, traffic through the Strait of Hormuz remains low. Prices have continued to soften in the early trading window as the US are having “good talks” with Iran, according to the President. Carbon (EUAs): The ICE Dec-26 traded to €82.33/t yesterday. The contract opened this morning at €82.49/t. Carbon (UKAs): The ICE Dec-26 fell to £59.85/t yesterday, opening this morning at £59.97/t. |
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