Firstly, what a week…
Energy markets have moved sharply over the past week as escalating tensions in the Middle East introduce risk to global energy supply chains. With the Suez Canal route effectively closed to LNG shipping, supply logistics into Europe have been disrupted, forcing cargoes to reroute via significantly longer shipping routes and tightening prompt supply.
As a result, UK gas and power markets have reacted quickly, with NBP gas for April trading close to 118 p/th and UK power around £93/MWh.
However, when we look beyond the headlines and analyse the forward curve, a more interesting picture emerges.
While the wider curve has lifted slightly, the majority of the movement remains concentrated in the prompt months, and the curve remains in steep backwardation, with prices falling significantly into the summer period:
- April Gas: 118 p/th
- June Gas: 77 p/th
- Aug Gas: 61 p/th
Power follows a similar pattern, declining from £93/MWh in April to £62/MWh by late summer. This type of curve structure typically indicates that the market is pricing a short-term geopolitical risk premium rather than a structural shortage of energy supply.
- In simple terms, traders currently believe:
- There is genuine short-term supply disruption, which is clearly evident.
- But longer-term supply fundamentals remain relatively stable, particularly with continued LNG availability into Europe via alternative shipping routes.
That said, markets remain extremely sensitive to geopolitical developments. Any prolonged disruption to LNG shipping routes or escalation in the region could quickly reprice the wider energy curve.
For UK businesses, this highlights the importance of having a clear procurement strategy rather than reacting purely to headlines.
At Enexus Energy, we monitor energy markets daily and help organisations navigate periods of volatility by developing structured purchasing strategies aligned to their risk appetite and consumption profile.
If your organisation would benefit from an independent review of your energy procurement strategy, feel free to get in touch.
