Weekly News Review - 13th October 2023

Oil and gas prices rise following Hamas attack on Israel

Global oil and gas prices have risen this week following the escalation of the Israel-Hamas conflict. Tensions rose after Palestinian militant group Hamas launched an unprecedented attack on Israel on Saturday in the biggest escalation between the two sides for decades. In response Israel launched a series of air strikes on the Gaza Strip and are preparing a ground offensive.

The benchmark month-ahead European gas price has climbed to its highest level since late February, closing at €53.29/MWh. UK gas prices also gained, with the day-ahead price at 121p/th and the month-ahead contract at 133p/th, the highest level for several months. Brent crude oil prices increased by $2.25/bbl to $86.83, while US prices also rose.

On Monday, Israel’s Ministry of Energy shut operations at the Tamar natural gas platform in the Mediterranean Sea over security concerns. The Chevron-owned platform is within range of rocket fire from the Gaza Strip. Israel is not a major oil producer and no major oil infrastructure runs close to the Gaza Strip. However, there are concerns that about a fifth of global supply would be blocked if passage through the Strait of Hormuz, a vital oil trading route, is disrupted.

The International Energy Agency (IEA) said that oil markets are likely to remain on edge as the conflict develops. In their latest report the IEA said: “The Middle East conflict is fraught with uncertainty and events are fast developing. Against a backdrop of tightly balanced oil markets anticipated by the IEA for some time, the international community will remain laser focused on risks to the region’s oil flows.”

Energy analyst Saul Kavonic told the BBC that global oil prices have risen “due to the prospect of a wider conflagration that could spread to nearby major oil-producing nations such as Iran and Saudi Arabia”. He added: “If the conflict envelops Iran, which has been accused of supporting the Hamas attacks, up to 3% of global oil supply is at risk.”

However, Saudi Arabia has the potential to increase oil production by around 3 million barrels a day if global supply is cut elsewhere, which amounts to almost 3% of global production. On Wednesday, Russia and Saudi Arabia announced that they will “most likely” maintain their oil production cuts despite concerns that the conflict between Israel and Hamas could drive crude prices to $100 a barrel.

World’s largest offshore wind farm produces power for the first time

The world’s largest offshore wind farm under construction, Dogger Bank, has started producing electricity for the first time. The wind farm is being constructed by SSE around 130km off the coast of Yorkshire and includes three 1.2GW stages known as Dogger Bank A, B and C. The first turbine at Dogger Bank A began exporting electricity to the grid on Saturday.

The first stage of the project is expected to be completed next summer with Dogger Bank B and C forecast to come online in 2025 and 2026, respectively. Once completed Dogger Bank will comprise of 277 ground-breaking 13MW Haliade-X turbines which have a blade length of 107m. This gives a world leading total capacity of 3.6GW which will be capable of producing enough clean energy to power the equivalent of six million homes annually.

Prime Minister Rishi Sunak said: “Offshore wind is critical to generating renewable, efficient energy that can power British homes from British seas. I’m proud that this country is already a world leader in reaching Net Zero by 2050, and by doubling down on the new green industries of the future, we’ll get there in a way that’s both pragmatic and ambitious.”

Alistair Phillips-Davies, Chief Executive of SSE, said: “There’s been lots of talk about the need to build home-grown energy supplies, but we are taking action on a massive scale. Dogger Bank will provide a significant boost to UK energy security, affordability and leadership in tackling climate change. This is exactly how we should be responding to the energy crisis.”

“But it is also a landmark moment for the global offshore wind industry, with Dogger Bank demonstrating just what can be achieved when policymakers, investors, industry, and communities work together to achieve something truly remarkable.”

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