Energy Prices Fall Sharply as US-Iran Ceasefire Announced

Market Update:

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• Yesterday saw markets edge higher on the upcoming U.S. deadline for Iran, with no ceasefire agreement in sight & U.S. attacks on Kharg Island.
• This morning, a two-week ceasefire was announced between the U.S. and Iran, just before Trump's deadline.
• "This will be a double sided CEASEFIRE!" he wrote on social media.
• Iran is supposed to allow all marine traffic through the Strait of Hormuz, while it stated it will continue to control the waterway.
• The parties are to negotiate over the next two weeks to reach a peace deal.
• Oil has now fallen to around $93.8/bbl, down over 15%, $14/bbl since Tuesday's close.
• May-26 gas price has fallen 21p/T, down from 135p/T close on Tuesday, to 114p/T.
• Win-26 is at 114p/T, having closed at 134.8p/T yesterday, down 20.8p/T.

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NATURAL GAS:
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European gas markets have seen a significant sell off at open this morning following news that the US and Iran have reached a 2 week ceasefire agreement overnight. The NBP front month contract is pricing at 114.40 p/th at time of writing, down 14% day on day. The equivalent TTF contract is pricing at €45.40/MWh, down roughly €7.00/MWh or 13% day on day. The ceasefire agreement was reached just hours before Trump’s latest deadline and it is conditional in that the US will stop military action if Iran opens the Strait of Hormuz. Yesterday we saw 2 Qatari vessels turn around in the strait after seemingly being granted permission to pass according to the US and now the markets will be closely watching for an expected increase in traffic through the strait and whether or not the ceasefire agreement will hold.
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The gas fundamentals remain bearish with warmer weather in the UK today keeping demand muted. The system is 10mcm long at open with total demand at 161mcm, 44mcm below seasonal normal. On supplies, Norwegian capacity is expected to see a slight decrease this week as yearly planned maintenance at Troll is due to start on Thursday as summer maintenance season begins to ramp up.

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ELECTRICITY:
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European power markets have also moved strongly to the downside overnight, off the back of the ceasefire agreement in the Middle East. The UK Baseload front month contract is pricing at £89.75/MWh at time of writing, down over £10.00/MWh or 10% day on day. The equivalent German Baseload contract is pricing at €80.45/MWh at time of writing, down €5.90/MWh or 7%.

The losses are weaker in the power markets given the gap higher in the carbon markets this morning. The Dec-26 EUA contract has priced as high €74.00/t CO2e first thing morning, an increase of over €2.00/t CO2e day on day, although prices have retreated since. A brief dip in wind generation today is also adding support with gas for power demand up. However, wind generation will see some improvement later in the week as wind speeds improve. Brent oil is down around 10% following the ceasefire news, going from roughly $105.00/bbl to $93.00/bbl overnight.

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Latest Price:
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Latest Gas & Power Annual Chart:
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