Short-term power prices have remained elevated this month, driven by low renewable output across North-Western Europe and ongoing nuclear generation constraints. However, strong wind generation and mild temperatures should provide some welcome temporary relief. Further out, prices remain supported by tight LNG supply and growing geopolitical risks. Hurricane Isaias is expected to disrupt US LNG exports for several weeks, while tensions in the Middle East are escalating, with tanker attacks in the Strait of Hormuz reportedly reaching their highest weekly level since the conflict began. Adding to uncertainty are reports that Syria may support Saudi operations against Yemen’s Houthis and that the White House has requested military options for strikes against Iran ahead of the 3rd of November US midterm elections.
On the LNG front, just two vessels have berthed at UK terminals since the beginning of October, a decrease of nine shipments compared with the same October last year.
The euro’s fall to a 17-month low is adding to broader economic pressures across the Eurozone, raising the cost of dollar-denominated imports, particularly oil, diesel and LNG.
Despite recovering Middle Eastern flows, Brent crude has gained around $5/barrel amid Hurricane Isaias-related US Gulf production shut-ins, reports of potential US strikes on Iran and escalating tanker attacks that could further disrupt traffic through the Strait of Hormuz. The G7 agreed to accelerate the release of 100 million barrels of previously pledged emergency oil stocks over four months, prioritising diesel supplies. However, with no additional volumes committed and refinery disruptions and diesel shortages persisting, prices are likely to remain supported and volatile.
