Headlines:
- The US and Iran seem to be no closer to agreeing terms for peace
- Only small numbers of ships are being allowed through the Strait of Hormuz
- Pressure on the EU to increase Gas Storage before the winter
Energy Overview
Gas and Electricity Year Ahead Wholesale costs are higher than last week. Oil is lower at $107 from $114.
The last week continued the pattern of claims that an agreement would soon be found between the US and Iran to end the conflict in the Middle East, followed by terms being rejected. With each false hope, energy prices have tended to initially fall, followed by increases. The US appears to want to avoid a formal end to the fragile ceasefire and Iran seems unwilling to agree to US demands, despite the blockade of their ports and the threat of further military action. The US plan to escort ships through the Strait of Hormuz was quickly paused, most likely due to security concerns. However, Iran has allowed LNG cargos for Pakistan, who they would see as a neutral / friendly nation, which may be a route that others take. The inflated cost of Oil and Gas is unlikely to end soon, especially when factoring in the damage that has been done to producer’s infrastructure. EU Gas Storage levels are 35% full compared to 43% last year and 65% in 2024. The EU imported large quantities of Russian LNG before a partial ban from April 2026 and a full ban on contracted supplies being due in January 2027. There will be some urgency to increase stocks before winter 2026 / 2027 despite the price premium.
Gas continues to set the price direction for our Electricity Wholesale price. The government has announced that the Electricity Generation Levy (EGL) will increase from 45% to 55% in July 2026, in order to pressure some Renewable generation away from the lucrative Wholesale market, onto a more consumer friendly arrangement. The last week saw Gas provide 28% of generation and Wind 19%. Supplies via the Interconnectors were 17%.
We would encourage any customer with a contract that ends in the next few months to discuss your renewals with us, and we will look to provide additional market intelligence, guidance and support as required.
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