Middle East Conflict: Oil Surges 16% as Gulf Export Shutdown Looms

Market Update:

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• Thursday saw prices trade slightly higher than Wednesday.
• This morning, prices opened lower, before a reversal and push higher above yesterday’s close.
• Oil is at $87.12/bbl, up 2%, having been trading lower for the start of the day.
• Qatar's energy minister told the Financial Times he expects all Gulf energy producers to shut down exports within weeks, a move he said could drive oil to $150 a barrel, according to an interview published on Friday.
• Ongoing attacks continue across the region, focusing on Iran and Lebanon.

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NATURAL GAS:

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European gas markets remain alleviated following this week’s developments in the Middle East. The NBP front month contract is pricing at 134.20p/th at time of writing, up 3.10p/th day on day but down significantly from Tuesday’s high of 171.20p/th. Gas markets have moved away from multi year highs on peace talk prospects and the potential introduction of security measures for vessels transiting through the Strait of Hormuz. Despite the move down, the S26 contract remains at a premium to Win-26, disincentivising summer injections ahead of the start of the refilling season. Europe is expected to be reliant on LNG this summer in order to refill storages and we have already seen a number of LNG vessels divert to Asia, away from Europe, due to the premium Asian markets now hold over Europe.

Away from the Middle East, comments from President Putin this week suggest Russia could be looking at decreasing current supplies to European markets ahead of the pre-planned phase out in 2027. This news comes after a Russian flagged LNG tanker was sunk in the Mediterranean following a drone attack.

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ELECTRICITY:

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European power markets have traded higher during the morning session. The UK Baseload front month contract is pricing at £104.00/MWh at time of writing, £3.10/MWh higher day on day. The equivalent German Baseload contract is pricing at €95.60/MWh, up €1.80/MWh. The Strait of Hormuz closure and the shutdown at Ras Laffan continue to have an impact on the power markets.

Milder temperatures continue across North West Europe, alleviating power demand. Above seasonal normal temperatures are expected to remain for the UK and the continent until the back half of March. However, wind generation has been well below seasonal normal this week with no signs of improvement until the back half of next week. As a result, gas for power demand has increased.

In wider commodities, Brent has climbed roughly 16% week on week and overnight, President Trump has referenced that the US could potentially be taking action to ‘reduce pressure on oil’. We have seen the US ease sanctions on Russian oil delivering to India, in an attempt to alleviate supply tightness in the market. Carbon EUA’s have maintained at lows this week, with the Dec-26 EUA contract currently pricing at €71.00/t CO2e.

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Latest Price:

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Latest Gas & Power Annual Chart:

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Brent Crude:

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