The last couple of weeks have been a whirlwind. After both TTF and NBP moved to highs not seen since early April due to the Iran-Israel conflict, the market did a quick U-turn yesterday returning to levels prior to 12th June.
The U.S. attacked Iranian nuclear sites over the weekend increasing concern over supply disruption and higher insurance costs if the Strait of Hormuz was closed. Iran’s parliament reportedly approved the closure of the Strait of Hormuz, through which around 20% of global oil and gas demand flows. However, on Monday night U.S. President Trump announced that Iran and Israel have agreed to a ceasefire. Despite it looking pretty shaky yesterday, with both sides stating the ceasefire was violated, the market eased removing the risk premium built up. Traders and analyst have been reported saying talk of a Hormuz closure and broader war risk has faded for now. Today Israel’s NewMed said the Leviathan natural gas field that supplies gas to Egypt and Jordan, shut down nearly two weeks ago would resume operations in the next few hours. Oil markets have also eased after reaching 5-week highs although the market continues to assess the situation.
Moving away from geopolitics, the fundamental picture is looking comfortable. Renewable generation is increasing whilst temperatures are expected to remain above normal easing demand. On the supply front Norwegian flows and LNG sendout also remain stable. EU storage levels are continuing to inject with caverns over 56% full. However, it’s always important to note any unexpected shifts in geopolitical developments or weather forecasts could reintroduce short-term volatility.
In other news this week the European Union’s member states have reached an agreement with the EU Parliament to loosen the EU’s rules on filling gas storage, following concerns that earlier rules risked inflating energy prices. The deal allows the EU’s member states to achieve the 90% filling target at any point in time between October 1 and December 1, rather than strictly by 1 November, taking into account the start of the member states withdrawal period. Once the 90% target is met, it should not be required to maintain that level until 1 December. The EU’s member states should also have the possibility to deviate by up to ten percentage points from the filling target in case of difficult market conditions, such as indications of speculation hindering cost-effective storage filling. Finally increased transparency on the origin of stored gas, requiring Member States to report the share of gas originating from Russia will be required.
