Crude oil prices rose sharply on Monday after a weekend of escalating geopolitical risk in Israel/Lebanon and Russia/Ukraine and amid news that an oil tanker was on fire in the Red Sea after being attacked by Yemen-based Houthis, threatening an environmental disaster.
Brent futures closed up 3% yesterday, from USD 79.02/barrel on Friday to USD 81.43/barrel while WTI futures rose by 3.5%, from USD 74.83/barrel to USD 77.42/barrel.
The Sounion tanker was attacked on Wednesday and again on Friday and has been on fire since then.
In a statement on Saturday, the US State Department said: “The Houthis’ continued attacks threaten to spill a million barrels of oil into the Red Sea, an amount four times the size of the Exxon Valdez disaster. While the crew has been evacuated, the Houthis appear determined to sink the ship and its cargo into the sea.”
On Sunday, the ongoing conflict between Israel and Hezbollah reached its highest pitch since 2006, as both sides launched attacks on each other.
Meanwhile, Russia stepped its drive to disable as much energy infrastructure as it can in Ukraine, ahead of the coming winter. So far, that infrastructure – much of it built during the Soviet era – has proved remarkably resilient, thanks to its high level of redundancy.
Natural gas prices in the three main consuming regions diverged.
In the US, Henry Hub fell below the significant USD 2/MMBtu threshold, seen by some major producers as a break-even level for free cash flow. The September contract, which expires on Wednesday, was down 3.3%, from USD 2.02/MMBtu to USD 1.96/MMBtu.
In continental Europe, TTF was up 1.9%, from USD 12.09/MMBtu to USD 12.32/MMBtu.
The September contract, which expires on Thursday, recovered around a third of the ground that it lost during the first four sessions of last week. More of that loss is set to be recovered today, if the rise in early trading is anything to go by.
UK markets were closed for a public holiday so there was no change in NBP.
The new Labour government came under increasing pressure over the weekend to change its stance on the means-testing of winter fuel payments, in the wake of last week’s announcement by regulator Ofgem that household bills are set to rise by 10% from October.
Prime Minister Kier Starmer is therefore likely to welcome the distraction brought by today’s news that the band Oasis – at the height of its success when the last Labour government came to power in 1997 – is to reform after its split in 2009. In a major speech today from the rose garden of 10 Downing Street, Starmer is expected to caution that things will get worse before they get better.
In Asia, the JKM LNG benchmark was unchanged at USD 13.82/MMBtu, so the rise in TTF narrowed the TTF-JKM spread from USD 1.73/MMBtu to USD 1.50/MMBtu.
European coal and carbon markets edged downwards. API2 coal was down 0.1%, remaining at USD 4.82/MMBtu after rounding. EU emissions allowances fell by 0.9%, from EUR 70.50/tonne to EUR 69.89/tonne.
WTI, NBP, TTF and EU CO2 data from ICE. Henry Hub, JKM and API2 data from CME. Prices in USD/MMBtu based on exchange rates at last market close. All monetary values rounded to nearest whole cent/penny. Text and graphic copyright © Gas Strategies, all rights.
Got a question or comment about this story or other energy matters? Drop our editor, Penny Sukhraj, a line: [email protected]
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