Trump’s last ditch attempt to save the mid-terms

GAS

Front-end delivery markets remain high and wide, with Trump’s foreign policy growing increasingly incoherent as the threat of a Republican drubbing at the November mid-terms looms large.

With a view to lowering global diesel prices, Trump has committed what might turn out to be his least popular flip-flop yet.

Despite having signed into law only three weeks ago tariffs up to 100% on high-profile buyers of Russian energy, Trump is blindsiding Ukraine’s President Volodymyr Zelenskyy on numerous fronts. First on 9th Oct, when he unilaterally decided to let Russian diesel imports into the US under a sanctions waiver running until Apr ’27. Then on Sunday, when he declared that Russia and Ukraine had agreed to cease attacking each other’s energy infrastructure, which neither were aware of! Then today it’s transpired that the order to restrict Starlink’s operations in Ukraine (needed so as to fend off Russia’s increasingly fatal attacks) came not from Elon Musk, but from the White House (source: Reuters).

And so, near-term delivery prices (including Summer-27) remain near their highest levels since late ’22, supported by head-spinning geopolitical risk and Europe’s historically low gas storage position (please chart below):

Thankfully, milder weather and softer Asian demand have been keeping a lid on speculative bullish fervour. Nonetheless, amid Trump’s unsettling policy outputs, markets are careering at pace toward November’s D-Day:

Monthly Day-Ahead Averages for October so far are at 191p/therm (or 6.5p/kwh exc non-gas) – having surpassed last month’s final number:

Monthly Forwards at the front-end are at a 177% premium to offers at the back end of the curve (reflecting the degree of speculative froth we’re contending with right now):

ELECTRICITY & CARBON

Electricity Seasonal Forwards remain at a comparative discount to gas (see relative strength chart below), reflecting the increasingly unrealistic premiums being assigned to fossil fuel transit/supply risk as the winter deepens:

On the Carbon side of things, mid-price Dec-26 UKA delivery sits at at £63.82/tn (and the spot is at early 62s) – prices have shed some of last week’s gains depsite rumours that EUA/UKA linkage looks increasingly likely (which will inevitably mean UKA prices will need to rise to parity):

UK electricty Monthly Day-Ahead Averages for October so far are at £140mwh (or 14 p/kwh exc non-energy) – having surpassed last month’s final number: