Following last week’s bullish surge prompted by the strikes on South Pars field and Ras Laffan LNG, UK gas and power prices have now seen four bearish days in succession. From the intra-day peak of 180p/th on 19th March, the front month gas contract was trading near 130p/th by the afternoon of 25th March.
The bearish movement has not been by a material improvement in global LNG supply. Ras Laffan LNG remains offline in the short term, and in the medium to long term will be operating at 83% of pre-war capacity for up to five years once the facility is restarted. The Strait of Hormuz remains at a near-standstill, although a handful of vessels have been identified passing through Iranian territorial waters, paying the Iranian regime for safe passage. Reported fees for that safe passage are around $2m, payable in yuan.
Instead, the week’s downward turn in prices has been prompted by claims from the Trump administration that peace talks are underway between the US and Iran. In a social media post on Monday, Trump stated that the US had been having “very good and productive conversations regarding a complete and total resolution of our hostilities.” Shortly after Trump’s post, Iranian state media denied any such conversations had taken place. Nevertheless, oil, gas and stock markets responded favourably to Trump’s statement, with the front month Brent crude contract plummeting to a recent low of $96/bbl, and the front month gas contract falling from 155p/th to 132p/th.
The US continues to grow its military posture in the Middle East. Sources suggest between 3,000 and 4,000 troops from the US’s 82nd Airborne Division are bound for the Middle East, with thousands of US marines also due to arrive in the region imminently. It should be noted the arrival of US Marines – alongside an amphibious assault ship – coincides with the end of a new 5-day deadline set by Mr Trump on Monday 23rd.
