Headlines:
- Energy costs are rising with concern for supplies through 2026
- The US and Iran are no closer to agreeing terms for peace
- EU Gas Storage needs to be replaced despite the higher cost
Energy Overview
Gas and Electricity Year Ahead Wholesale costs are higher than last week. Oil is higher at $111 from $107.
There was hope that President Trump’s visit to China could see Xi Jinping publicly apply pressure to Iran to remove some of their demands for peace. Unfortunately, this was not the case, but China continues to encourage diplomacy rather than aggression. Negotiations between the US and Iran show little prospect of making a breakthrough, with President Trump once again threatening more strikes against infrastructure, which to date has always resulted in counter strikes against Iran’s neighbours and price spikes. Energy markets are becoming more nervous due to the disruption to an estimated 20% of global Oil and LNG supplies through the Strait of Hormuz and some installations needing years to repair damage before they are fully operational. It also appears likely that there will be industrial action in Australia, impacting on LNG availability.
EU Gas Storage remains low at just 37% full compared to 44% in 2025 and 67% in 2024. The EU ban on some Russian LNG from April 2026 means less opportunity to replace Storage. This is a big psychological factor for energy prices as we approach winter 2026 / 2027, especially with a full Russian LNG ban starting from January 2027. Competition for supplies will likely start to increase as countries in Asia require more Gas to provide air cooling.
The last week saw Gas provide 23% of generation, Wind 23% and 21% via the Interconnectors. Electricity Wholesale costs are still being influenced by Gas, which the government is taking measures to try to address.
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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