UK gas and power prices remain extremely volatile due to the US / Israel / Iran conflict. The UK front month gas contract has seen intra-day swings of up to 29p/th so far this week, with news headlines eliciting intense reactions from market participants.
Comments by US president Donald Trump on Monday 9th were seen as de-escalatory, with Trump telling reporters the war could be over “very soon.” Gas prices for April 26 delivery dropped by 14% in the wake of Trump’s remarks, despite no change to gas availability from the Middle East. At time of writing, the Strait of Hormuz remains effectively closed and production at Qatar’s Ras Laffan LNG plant – the world’s largest gas liquefaction complex – remains halted.
LNG price signals now strongly favour spot deliveries to North East Asia over Europe,. Netbacks for deliveries to Japan and South Korea from the Gulf of Mexico are currently 40% higher than netbacks to Europe. This reality has seen at least nine cargoes initially headed for Europe redirected to Asia since the start of the conflict. A sustained period of stronger price signals from Asian markets will continue to attract deliveries away from Europe. This would present a systemic issue for Europe ahead of Winter 26/27, given EU gas storage is at just 29% fullness, a historic low.
Globally, major importers of Qatari LNG are already seeing active demand destruction measures. Thailand, for example, (which typically imports circa 3% of the world’s LNG) has ordered civil servants to work from home, cease overseas trips and use stairs instead of elevators.
Despite previous offers of naval escorts and insurance services made to shipping companies by the US president, reporting on 10th March stated the US Navy has refused requests from the shipping industry for escorts through the Strait of Hormuz, stating the risk of attacks is too high.
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