UK gas has continued to drift lower since the four-year peaks set in the second week of September, with another modest bearish week taking the winter contract 5.4% below the level at the time of our last update. The softening owes more to the atmosphere around diplomacy than to anything concluded at the negotiating table, with US-Iran talks at the UN General Assembly, a phased proposal for reopening the Strait of Hormuz and repeated assurances from US President Donald Trump that the war will end “very soon” all weighing on sentiment.
Set against that, nothing has actually been agreed; Washington rejected Tehran’s seven-day roadmap on Monday 28th September, the Strait remains effectively closed to Qatari LNG bound for Europe, and European gas storage sits at its lowest level ever recorded for the time of year. Supply and demand fundamentals have not improved materially either, with Norwegian flows only now recovering from a fortnight of unplanned outages and UK heating demand forecast to climb sharply into early October. For the time being, the market is pricing the prospect of a settlement rather than the reality of a tight winter.
With the October 26, Q4 26 and Winter 26 contracts all expiring at the end of September, the front of the curve has rolled forward, and the new front month, November 26, was trading at 175p/th on the morning of 30th September. Before expiry, Winter 26 closed at 175p/th on Tuesday 29th September, having shed 10p/th in that session alone and some 33p/th since its four-year high close of 208p/th on Monday 14th September. Q1 27 and Summer 27, which take over as front quarter and front season from 1st October, closed at 175p/th and 128p/th, a gap that shows the market still expects a looser balance once the heating season is behind us.
Power has followed gas down, with the expiring Winter 26 contract closing at £144/MWh on Tuesday, 2.7% lower on the week, while November 26 closed at £145/MWh and Q1 27 at £146/MWh. Day-ahead power swung on wind output, falling to £117/MWh on Tuesday morning before jumping £42/MWh to £160/MWh on Wednesday 30th September. Brent crude moved the other way, reaching $107/bbl on Monday 28th September before easing to $104/bbl, 5.1% above the level at the time of our last update, while Europe’s key gas benchmark, the TTF, closed below the psychologically significant €70/MWh level on Tuesday against €73/MWh a week earlier.
The week’s diplomacy began with the first US-Iran shuttle talks in months on the sidelines of the UN General Assembly on Wednesday 23rd September, with Iranian Foreign Minister Abbas Araghchi communicating with US envoys Steve Witkoff and Jared Kushner through Qatari mediators rather than face to face. By Friday 25th September, negotiators were reported to be exploring a phased route out of the war, under which Tehran would reopen the Strait of Hormuz and Washington would lift its economic blockade.
That optimism was short-lived. On Monday 28th September, US President Donald Trump rejected a seven-day roadmap that would have seen the US lift its naval blockade, waive sanctions on Iranian oil sales and release around $12bn in frozen Iranian assets in return for a reopening of the Strait, telling reporters “I reject their proposal,” and arguing that Tehran wants an agreement because it is “losing so badly.”
Despite that rejection, prices fell rather than rose, with Tuesday 29th September bringing the sharpest sell-off of the week after Mr Trump said the conflict would be over “very soon,” adding that “oil prices are going to be tumbling down just like they were before I had to make that little excursion to the Islamic Republic of Iran.” Mr Araghchi, posting on social media, said that “our conditions are clear, and any move toward reopening the Strait of Hormuz is contingent on these conditions being met,” and that Tehran was still awaiting a definitive response through the mediators. Iranian Supreme Leader Mojtaba Khamenei struck a harder line, saying it “won’t be long” before “painful blows” force the US military out of the Middle East. For the UK market, the pattern of the last fortnight holds: talk of a settlement moves prices further and faster than the substance behind it.
Qatari LNG movement has picked up to its most sustained level since early July, with several QatarEnergy-linked vessels transiting the Strait over the past week. Among them, the Al Ghashamiya delivered into Dahej in India on Thursday 24th September, the Shandong Redwood into Pakistan on Wednesday 23rd September, and the GasLog Skagen appeared off Sri Lanka on Sunday 27th September carrying a cargo loaded at Ras Laffan. To set that in context, Kpler recorded no visible transits by Qatari-linked vessels through the whole of August, but every cargo that has moved has gone east rather than towards Europe. QatarEnergy has meanwhile extended its force majeure notices again, telling Italian utility Edison it will receive no cargoes until December, with Qatar having exported just 18 cargoes to the end of August against 509 in the same period last year, a fall of 96%.
Attacks on shipping have continued alongside the diplomacy, with the Kuwaiti tanker Al Funtas struck while transiting the Strait on Monday 28th September, the 86th confirmed incident in the Gulf area according to the International Maritime Organization. Iran’s semi-official Fars News Agency claimed that Iranian forces targeted 19 vessels described as “violators” over the previous weekend, a claim which remains unconfirmed. Producers are now paying shipping companies fees of as much as a quarter of a cargo’s value to sail the Strait, and while Emirati crude exports have recovered to pre-war levels and Saudi Arabia has sold 60 million barrels for delivery beyond the Strait, around a third of Gulf oil remains missing from global supply. From a UK gas and power perspective, it should be noted that Qatari LNG has no comparable workaround, with no overland route out of the Gulf.
In terms of pipeline flows, Norwegian supply has recovered strongly as the shoulder-period maintenance season ends, with exit nominations climbing to 315.7mcm for the gas day of Wednesday 30th September, from 290.7mcm on Tuesday and 226.1mcm a week earlier. The unplanned Troll compressor failure that weighed on flows for a fortnight has been cut to 7.0mcm/d, against 46.2mcm/d at its peak, and Langeled deliveries into Easington rose to 55.3mcm from just 2.2mcm on Friday 25th September. Planned work at Nyhamna will remove 19.8mcm/d until 24th October. That improvement arrives as UK temperature forecasts turn colder from the start of October, with heating demand projected to climb from around 55mcm/d in late September towards 85mcm/d by 8th October.
Back in Europe, gas storage reached 71.33% on Tuesday 29th September, the lowest level ever recorded for this point in the year, against 82% at the end of September last year and a five-year average in the mid-80s. The gap between member states remains stark, with Germany at 57.74% and the Netherlands at 58.15% against France at 83.23% and Italy at 86.97%.
More encouragingly for European buyers, price signals for US exporters turned back in the continent’s favour during the week, with a cargo from the Gulf of Mexico worth $24.4/MMBtu into the Isle of Grain in the UK versus $23.8/MMBtu into Osaka, Japan. Spot LNG cargoes respond to the strongest price signal, so a sustained European premium over Asia would help the continent’s refill through the remaining weeks before winter demand takes hold.
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