Middle East escalation risk has moved back to the centre of European energy pricing, with reports that Washington has urged Gulf states to prepare for renewed military action against Iran driving UK gas to near four-year highs overnight. Power markets moved even harder on domestic fundamentals, with day-ahead baseload settling almost 60 per cent higher than the previous session ahead of a collapse in wind output, while crude, coal and global LNG benchmarks all eased into Tuesday’s close.
Natural Gas
Prices are being driven by the combination of constrained supply and a storage position with no margin for error. NBP day-ahead settled 3.00p higher at 238.00 p/therm on Tuesday and has been bid to around 243.55 p/therm this morning, with the front-month November contract at 237.33 p/therm and Q1 27 at 234.83 p/therm. Unplanned Norwegian outages at Kårstø, Oseberg, Kollsnes and Sleipner removed between 37 and 50 mcm/day on Tuesday, though total Gassco exit nominations have since recovered to 330.1 mcm/day with the two processing hubs expected back by the day-ahead. UKCS output fell to 82.20 mcm/day while UK system demand rose to 162.14 mcm/day, and LNG send-out of around 18 mcm/day is covering much of the gap, with four cargoes booked into UK terminals over the next fifteen days. The vulnerability is inventory: EU storage sits at 74.93 per cent, or 848.8 TWh, the lowest seasonal level in records back to 2009, with UK sites at just 41.31 per cent. Geopolitics compounds it, as QatarEnergy has extended force majeure on a 6.4 bcm/yr supply contract to 30 December and flows through the Strait of Hormuz remain severely disrupted, taking total missing cargoes to 38. Continental prompt was the one soft spot, with TTF day-ahead just above €97/MWh and the November contract around €96/MWh.
Electricity
Power rallied on generation rather than fuel cost. UK day-ahead baseload settled at £175.00/MWh against £109.96 the previous day, with peak at £187.63/MWh, as the market priced in an advancing Scandinavian blocking high that will cut wind load factors to between 3 and 6 per cent from Thursday to Saturday and keep UK metered wind below 5 GW through 6 November. Tuesday’s intraday system prices ran from minus £15.61/MWh in the early morning to £280.13/MWh in the evening ramp, and this morning cleared at £249.50/MWh overnight before settling around £240.00/MWh through the mid-morning. Nuclear availability offers little help, with one Heysham 2 unit fully out on planned work and derates on two further AGR units. The forward curve diverged from the prompt, with November baseload up £1.99 to £191.59/MWh but December, January 27 and Cal 27 all easing, the latter to £144.85/MWh. On the Continent, German November baseload climbed to €221.70/MWh and French November set a record €210.75/MWh, while coal dark spreads near €99/MWh against clean sparks of around €12/MWh are keeping thermal coal ahead of CCGTs in the merit order. With southern Norwegian hydro at multi-decade lows and British interconnectors net exporting, the import cushion into the low-wind period is unusually thin.
Other Commodities
Crude eased on Tuesday before turning higher this morning, with Brent M+1 settling $1.93 lower at $113.88/bbl and WTI at $99.90/bbl, only for an attack on a Saudi refinery to renew supply-disruption concerns overnight. Coal was weaker, with API2 ARA Cal 27 down $2.64 to $144.72/tonne and the 2028 and 2029 contracts both near $133/tonne. Carbon slipped modestly in both schemes, with EUA Dec 26 at €88.05/tonne, down €0.14 but still 2.80 per cent higher on the week, and UK ETS Dec 26 at £65.18/tonne, or €77.91/tonne, leaving the UK allowance a little over €10/tonne below its European equivalent and the spread broadly unchanged. Global LNG benchmarks softened, with JKM M+1 at $31.73/MMBtu and North West European November LNG at $27.40/MMBtu, while Henry Hub bucked the trend to settle 3.65 per cent higher at $2.70/MMBtu. Sterling was mixed, easing 0.27 per cent against the dollar to 1.3303 and firming slightly against the euro to 1.1953, leaving currency a neutral factor for UK import pricing.