Headlines:
- Confirmation that a peace deal will be signed, has seen energy prices fall
- Expectations that the Strait of Hormuz will open
- EU Gas Storage remains low and needs to be topped up for winter 2026/2027
Energy Overview
Gas and Electricity Year Ahead Wholesale costs are lower than last week. Oil is lower at $81 from $91.
The planned signing of a peace deal on Friday the 19th of June by the US and Iran has seen significant falls in energy costs, with the expectation that Oil and Gas will begin to move through the Strait of Hormuz, which has impacted on 20% of global supplies. There is still a nervousness that military action by Israel could jeopardise the agreement and we have previously seen moments of false hope throughout the conflict. However, the ceasefire period has survived US and Iranian strikes, which underlines the desire by both parties for peace.
Mines in the Strait of Hormuz may have some impact on its use and there has been damage to some infrastructure that will potentially take years to repair before full Exports can resume. Although doubts remain, there is an expectation that additional Gas supplies will be available to meet the demand from countries in Asia. The EU may also have more opportunity to refill their very low Gas Storage which is just 45% full compared to 53% last year and 75% in 2024. This will give markets confidence for supplies in winter 2026/2027 when demand is at its highest. The industrial action in Australia which could impact on LNG Exports, is likely to continue, adding a price pressure.
The last week saw Gas provide 20% of generation, Wind 27% and 19% via the Interconnectors. Electricity Wholesale costs are still being influenced by Gas. The government is taking measures to lessen the link between Gas and Electricity Wholesale prices and is exploring more significant solutions.
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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