Jul26 Energy Market BriefJul26 Energy Market Brief: Volatile Markets

A month of two halves, June opened with a sharp rally on Middle East risk and Norwegian supply cuts, then handed most of it back as a ceasefire took hold, leaving wholesale gas and power lower over the month but firming again into the close. June was, in truth, two very different markets stitched together. The first fortnight was all about risk. The second was all about relief. By the time the month closed, both gas and power sat below where they started, but anyone who only glanced at the start and end points would have missed one of the more volatile months we have seen this year. Annual Gas Prices We came into June with the near curve already carrying a heavy geopolitical premium. The escalation in the Middle East that had been building since late spring came to a head in the first week, with missile exchanges in the Gulf and strikes on Iranian infrastructure, and the market priced it accordingly. NBP day-ahead opened the month around 118p per therm and pushed up to roughly 122p by the 9th, its highest point of June. Norwegian supply made the picture worse rather than better. Planned maintenance on the Troll field, followed by unplanned outages at Aasta Hansteen and Oseberg, pulled pipeline nominations down toward 280 mcm per day at one stage, and with European storage sitting at only about 40% against a more usual 55 to 60% for early June, there was very little slack in the system. Front-month gas was up around 13% over a rolling thirty days at the peak. The turn, when it came, was just as quick. A framework agreement between the United States and Iran from the middle of the month drained the war premium out of the curve almost as fast as it had gone in. By the 18th and 19th the day-ahead had fallen back below 100p, down more than 12% on the week, helped along by warmer weather, healthier wind output and a wave of hedge selling. The slide carried on into the final week, with day-ahead touching the high 90s around the 26th as the Strait of Hormuz returned to normal traffic and LNG shipping confidence recovered. All told, prompt gas gave back close to a fifth of its value from the mid-month high. The month did not quite end on its lows, though. Falling wind and some nerves over how durable the ceasefire really is lifted the day-ahead back toward 105p in the last few sessions. What stands out for buyers is how differently the back of the curve behaved. While the prompt was swinging by 20p or more, the annual contracts barely flinched. Cal-27 spent the whole month in a tight band between roughly 85p and 95p, and even at the height of the panic it traded a clear 25 to 30p below the front. That backwardation, with longer-dated gas priced well under prompt, held firm throughout and tells you the market still expects fundamentals to ease once this winter is behind us. The relief in June was very much a near-term story, not a structural reset. Annual Power Prices Power tracked gas closely all month, which is no surprise given how much of the despatch stack gas-fired plant has been covering. Day-ahead baseload started June up around £114 per MWh and softened through the month in step with the gas sell-off. The more interesting feature came early on, when an unusual structure appeared in the curve: forward contracts for July and Winter-26 were briefly trading above the day-ahead, the opposite of the usual shape. That was down to a run of nuclear outages and stubbornly low wind generation, which left the forward market pricing in tightness that the prompt, for once, was not. Forward power eased alongside gas as the premium unwound, but as with gas the longer-dated contracts were far stickier than the front. Summer-27 and Cal-27 power held well below prompt levels throughout, mirroring the gas backwardation and reflecting the same view that the system should be less stressed twelve months out. The month closed firmer, with power lifting again in the final sessions as wind dropped away and gas-for-power demand picked back up, a reminder of how sensitive the grid remains to a still day. Oil, Carbon and the Wider Picture Brent crude carried its own Gulf risk premium for much of June, opening the month around 94 dollars a barrel and trading nervously through the escalation before easing back as the ceasefire held and Hormuz shipping normalised. Carbon stayed firm, with EUA December allowances holding around 80 euros a tonne on the back of solid industrial demand and tighter power balances. For context, this all sits against the Ofgem price cap rising 13% to £1,862 from 1 July, a reminder that the wider cost base for energy users is still elevated even when wholesale markets are falling. For businesses coming up to renewal, June is a useful lesson in why timing the prompt is so hard and why the shape of the curve matters more than the headline. The sharp relief at the front did not feed through to the annual contracts in anything like the same measure, so a fixed price taken at the wrong moment in the month could have looked very different from one taken a fortnight either side. With the long-dated strip still trading at a healthy discount to the prompt, there remains a reasonable case for spreading exposure rather than betting everything on a single point in a jumpy market. As ever, if you would like to talk through what this means for your own contracts, our energy consultants are happy to help.