The chart of LNG exports toward the end of this report shows the decline in LNG availability in world markets since Qatari output stopped last month. While the decline is significant, it brings LNG exports back to 2024 levels. Of course, demand has also increased during that period as supply has grown. So, the loss of Qatari LNG is a serious shock to markets and a major worry for the rebuilding of storage ahead of next winter. Consequently, great hopes are pinned on the talks between the US and Iran which may continue on Thursday. Today, a high-level military delegation from Pakistan, led by its army chief Field Marshal Asim Munir, travelled to Tehran with the aim of ensuring that the talks go ahead. Markets, whether it be gas, power, oil or equities seem to be increasingly confident that a deal will be reached. The S&P 500 even hit a new all-time high today. Yet, it has not even been confirmed that talks will take place on Thursday. Probably the strongest indicator that diplomatic progress is being made, was Trump’s claim that the war is so close to being over that there is no need to extend the ceasefire that is otherwise due to expire this weekend.
In the meantime, gas and power prices across Europe have continued to soften. While prices for this summer and the coming winter are still elevated, further out, prices are lower than they were at times in the second half of last year, suggesting limited risk of tightness this year feeding through into next year. For now, the LNG send out rate remains in the range it has been for this year and gas inventories are starting to build, but the LNG send out rate must surely come under pressure as the supply of Qatari supplies has stopped and competition with Asis for cargoes in the spot market is fierce. Asian LNG prices are at a significant premium to European gas hubs, due to strong demand to secure supplies.
The market has also benefitted from strong wind generation. March was much stronger than historical averages for the month and April looks to be heading the same way. The forecast is for more windy weather into this weekend, but more settled next week albeit with plenty of sun and solar generation.
Progress in talks between the US and Iran, is crucial. If that does lead to a credible pathway towards normalising shipping through the Strait of Hormuz, the next question is how quickly output can be restored. It might be that the market has become too heavily weighted to an optimistic outcome.
| Commoditiy | Front contract (£p/therm) | Winter 26/27 (£p/therm) | Summer 27 (£p/therm) | Winter 27/28 (£p/therm) |
|---|---|---|---|---|
| Price | 103.67 | 103.89 | 79.61 | 80.33 |
| Weekly Change | -10.58 | -11.12 | -6.06 | -5.61 |
| Commoditiy | Front contract (£/MWh) | Winter 26/27 (£/MWh) | Summer 27 (£/MWh) | Winter 27/28 (£/MWh) |
|---|---|---|---|---|
| Price | 84.72 | 89.05 | 70.32 | 74.51 |
| Weekly Change | -4.38 | -4.02 | -0.99 | -2.51 |
| Commoditiy | US Gas ($/mmbtu) | Brent ($/b) | EUA (€/MT) | UKA (£/MT) |
|---|---|---|---|---|
| Price | 2.61 | 94.84 | 73.15 | 46.91 |
| Weekly Change | -0.11 | 0.09 | 2.43 | 4.75 |
No representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by Investec or its Affiliates in relation to the accuracy, reliability, suitability or completeness of any information contained in this document and any such liability is expressly disclaimed. This document does not purport to be all inclusive or to contain all the information that you may need. Investec gives no undertaking to provide the recipient with access to any additional information or to update this document or any additional information, or to correct any inaccuracies in it which may become apparent.
This document does not take into account the specific investment objectives, financial circumstances or particular needs of any recipient and it should not be regarded as a substitute for the exercise of the recipient’s own judgement and due diligence. Investec does not offer investment advice or make any investment recommendations. Recipients of this document should seek independent financial advice regarding the appropriateness or otherwise of investing in any investment strategies discussed or recommended in this document and should understand that past performance is not a guide to future performance, and the value of any investments may fall as well as rise.
Investec expressly reserves the right, without giving reasons therefore, at any time and in any respect, to amend or terminate discussions with the recipient of this document without prior notice and hereby expressly disclaims any liability for any losses, costs or expenses incurred by such recipient.
