European Gas Climbs for Third Day as Mideast Supply Risks Grow
(Bloomberg) -- European natural gas rose for a third day as renewed fighting between the US and Iran dimmed hopes for any near-term resumption of energy flows via the Strait of Hormuz.
Benchmark futures advanced as much as 4.3% on Wednesday before paring some gains. Prices are still near the highest intraday level since Jan. 2023, with the October contract having added around 10% this week.
The US conducted a second day of strikes on Iran and President Donald Trump downplayed chances for a deal to end more than six months of conflict. The war has choked off about a fifth of global supplies and flows through the Strait of Hormuz remain near a standstill.
“We are not expecting a 2022-style energy crisis, but Europe remains structurally vulnerable to another gas shock,” said Tancrède Fulop, a senior analyst at Morningstar. He sees the European gas balance remaining tight next year, with meaningful price normalization unlikely before 2028 when new global LNG supply comes online.
The continued disruptions threaten Europe’s efforts to rebuild gas inventories ahead of winter, which are currently just 65% full, the lowest seasonal level in records going back to 2009. Prices need to stay elevated for the region to attract more LNG shipments to its shores as it competes for a limited pool of cargoes and some buyers in South Asia are boosting purchases.
“The need to rebuild inventories ahead of winter will strengthen import demand in Europe and may pull more cargoes east to west,” BMI, a unit of Fitch Solutions Inc., said in a report, adding that this would also maintain upward pressure on the Asian benchmark.
Dutch front-month futures, Europe’s gas benchmark, rose 1.7% to €73.42 a megawatt-hour at 8:30 a.m. in Amsterdam.
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