European Gas Rebounds Amid Escalating Violence in Middle East

(Bloomberg) -- European natural gas prices rebounded as traders weighed escalating tensions in the Middle East and risks to energy supplies through the region. 

Benchmark futures rose as much as 3.2% in early trading, following a rise in oil. The US and allies launched airstrikes against Houthi rebels in Yemen, stepping up retaliation for attacks on ships in the Red Sea that have already imperiled flows of some goods through the vital waterway.

While there’s been no direct impact on exports of liquefied natural gas, tensions in the region have forced the majority of fuel shippers to choose longer voyages to avoid the coast of Yemen and the Red Sea. Traders are closely watching whether LNG tankers sailing from Qatar to Europe, which have so far continued using the route, will also start diverting. 

Read also: What the US-led Airstrikes on Yemen Will Mean for Oil Prices

In addition, an arctic blast spreading across Europe this week has fueled demand for gas in heating and power generation from the UK to Germany. That has accelerated withdrawals from the continent’s gas storage facilities. The reserves are still at levels above historic averages, but increased usage has helped to slow down the recent gas-price slump.

For now, most industry watchers and officials are confident that Europe will get through the winter comfortably. The market still faces regular bouts of price volatility after the region lost most pipeline gas deliveries from Russia in 2022, and a sizable supply disruption or surge in consumption can cause sharp day-to-day moves.

An unplanned field outage in Norway on Friday also added some support to prices. 

Dutch front-month futures, Europe’s gas benchmark, were up  at € a megawatt-hour by 8:31 a.m. in Amsterdam. The UK equivalent contract also advanced. Both still headed for a weekly decline.

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