This morning energy markets have softened marginally on the back of a slight drop in oil markets.
Iran’s alleged attempt yesterday to disrupt the passage of a UK crude tanker through the Persian Gulf had added to fears in oil markets and subsequently boosted prices. Benchmark Brent crude was 3 cents higher at $67.04 p/barrel in London trading at 4:47 p.m. local time.
Oil has been rallying since the middle of last week as tensions surrounding Iran sanctions stoked concerns over crude flow disruption. Consequently we have seen an average increase of 0.475 p/kWh on wholesale electricity prices and 0.22 p/kWh on wholesale gas prices.
Higher oil prices may hurt at the margin, but the recent tensions with Iran highlight one longer term risk to the UK’s energy supplies – its growing reliance on imports of liquefied natural gas. The UK gas market is regularly topped up with LNG cargoes from Qatar and other countries and is expected to become more reliant on shipments of the supercooled fuel as North Sea output declines in the coming years. The UK is lucky for now that gas supplies are ample and so far Iran has shown little interest in targeting non-oil tankers. However, becoming too reliant on LNG is a risk worth considering for the future.
Please note: Tendering activity is still suspended whilst we wait for the markets to settle. If we have any concerns with your individual supplies we will be in contact directly.