As the week began, multiple intersecting bullish drivers served to create a spike in near-term gas and power prices.
In the geopolitical arena, the protests in Iran – which began on 28th December as a protest against the financial crisis – saw US President Donald Trump threaten “very strong action” if protestors were executed.
On the morning of 14th January, the Iranian regime warned of attacks on US bases within neighbouring countries if the US targets Iran. The situation is rapidly evolving at time of writing, so context is key. The key risk associated with an Iran / US conflict is around potential interruption to gas and oil shipping via the Strait of Hormuz. A blockade or other disruption in the Strait would impact around 20% of the global LNG volumes. By mid-morning on 14th, Brent had gained $6/bbl for the week so far, while the UK front month gas contract gained 10p/th.
Colder weather forecasts across Europe for late January / early February also set the bulls running. 46-day forecasts run on 13th Jan indicated a deep slump below seasonal normal temperatures. A cold snap would add further pressure to European gas storage fullness, which at 53% fullness is already at the lowest relative to time of year since the crisis of 2022. Surging LNG imports provide a buffer against full depletion but were already being priced in towards the end of 2025.
Investment funds cut their net short positions on the TTF again as per the latest commitments of traders report, down from 72TWh to 55TWh. The reported period for the CoT report ended on 9th January. Next week’s report is likely to show significant further cuts in net short positions, as funds shorting the main European gas benchmark early this week will have activated stop losses in response to bullish movement.
